Q2 2021 UMH Properties Inc Earnings Call

For the quarter same property occupancy was up 280 basis points or 658 units over the last year.

Sequentially same property occupancy increased by 186 units the same property NOI increased 13% or $2.7 million as compared to the second quarter of 2020.

Year to date same property NOI increased 14, 5% or $5.8 million as compared to last year. This is the seventh quarter in a row that we have achieved double digit the same property NOI growth the improved operating results substantially increase the value of our portfolio.

During the quarter, we added 134 homes to our rental portfolio, bringing our total portfolio to approximately 8600 rental homes.

At quarter end, our rental home occupancy rate was 95, 9%.

The rental home business has continued to meet our expectations demand for rental units throughout our portfolio remains robust the availability and price of inventory remains our biggest concern.

We have been aggressively ordering homes and believe that we will achieve similar occupancy and revenue gains throughout the rest of the year.

Home prices are up approximately 40% from pre COVID-19 levels, we believe that at some point the supply chain, we will return to previous norms with prices and delivery times eventually easing.

Gross sales for the second quarter were $9.6 million representing.

The representing an increase of 91% over last year, it's important to note that even with the impact of Covid last year sales were strong as compared to our historic results. This was a quarterly sales record.

We sold a total of 120 homes of which 73 were new home sales of 47 were used home sales our average sales price was $80000 as compared to $61000 in the prior year period.

We financed 63% of our home sales in our portfolio now has the principal balance of $49.2 million at a weighted average interest rate of 7.1%.

Our communities of reporting strong sales demand and we anticipate continued sales growth for the remainder of the year.

Our sales operations biggest concern is also the availability and pricing of our inventory.

We have expansion sites coming online in markets that are experiencing strong sales demand we anticipate.

<unk> completing the development of approximately 330 sites in 2021.

These expansion sites are anticipated to generate meaningful sales increase in the future.

Yeah.

During the quarter, we acquired 1 community in Ohio for a total purchase price of $10.3 million.

The community contains 206 sites of which 86% are currently occupied the.

The community is well located within our existing footprint in Ohio.

The community is in relatively good condition, but will require some paving office and clubhouse renovation and the removal and replacement of old homes.

We continue to seek acquisitions that meet our growth criteria.

There is strong demand for stabilized and value add manufactured home communities.

This is the resulted in increased prices and limited opportunities that fit our growth criteria.

High quality communities are trading at or above replacement value as a result of this elevated pricing. We have decided that now is the time to build or buy new communities from developers.

We have entered into a contract to purchase 1 all age community in Florida that is currently being developed we also have an executed letter of intent and are working towards contract on another development deal in Florida.

These communities will contain a total of 366 developed sites for a total purchase price of approximately $38.4 million to communities will be highly amount of ties with clubhouses pools, bocce ball pickle ball splashed pools dog parks and more.

To fund these acquisitions, we are considering all options, including potential joint ventures with institutional investors.

UMH can generate similar earnings growth for the foreseeable future by filling our 3400 vacant sites, obtaining our 4% rent increases increasing the volume and profitability of our home sales expanding our communities and growing our finance business. The continued improvement in our operating results.

We will drive significant earnings growth, but the reduction of our cost of capital will be equally if not more beneficial.

We plan to call or $247 million.

675% series C preferred stock in July of 2022, reducing our cost of capital from 675% to 4% would generate additional <unk> of $6.8 million or <unk> 16 per share further in January of 2.

'twenty 3 we plan on calling our $215 million 6.375% series D preferred stock and.

And now Anna will provide you with greater detail on our results for the quarter.

Thank you Sam funds from operations or <unk> was $9.9 million or 21 cents per diluted share from the second quarter of 2021 compared to $7.1 million or 17 cents per diluted share for the prior year period.

Normalized <unk>, which excludes certain nonrecurring items was $10.3 million or 22 cents per diluted share from the second quarter of 2021 compared to $7.1 million or <unk> 17 per diluted share for the prior year period.

These increases were due to the strength of our operating results as well as the redemption of our 8% series B preferred stock in October 2020.

Rental and related income for the quarter was $39.3 million compared to $35.1 million a year ago, representing an increase of 12%.

Unity NOI increased by 14% for the quarter from $19.6 million in 2020 to $22.3 million in 2021.

These increases were primarily due to community acquisitions.

<unk> of rental homes the growth in the occupancy and an increase in rental rates.

Our same property monthly site rent increased 3.7% and our monthly home rent increased 3.6%.

Our average monthly statement is now $471 and our average rent is $805.

Same property occupancy increased 280 basis points or 658 occupied sites over the last year.

Same property occupancy is now 87, 1% and same property rental home occupancy is 96, 3%.

Sales of manufactured homes increased 91% per the quarter from $5 million in 2020 to $9.6 million in 2021.

Our 91% increase in sales resulted in a sales gain of $1.2 million for the quarter.

As compared to a $118000 gain in the prior year.

Year to date sales have improved 70% from $8.2 million last year to $14 million this year.

Our sales gain for the year is at $929000 as compared to a loss of $197000 last year.

During the quarter, our common shares reached an all time high stock price of $23.31.

This new high as well as the additional equity raised through our ATM resulted in our equity market capitalization, surpassing $1 billion.

We sold approximately 3.9 million shares of common stock at a weighted average price of $20.37 per share.

Generating gross proceeds of $79.3 million and net proceeds of $78.1 million after offering expenses.

These proceeds will be used for general corporate purposes, which include the purchase of manufactured homes for sale or lease the customers acquisitions of additional properties expansion of our existing communities and paying down short term debt on a temporary basis.

As we turn to our capital structure at quarter end, we had approximately $530 million and debt.

Of which $466 million was community level mortgage debt and $64 million with loans payable.

88% of our total debt the fixed rate.

The weighted average interest rate on our mortgage debt with 381% at quarter end compared to $4.1 4% in the prior year.

The weighted average maturity on our mortgage debt was 5.5 years, which is unchanged from a year ago.

At quarter end UMH had a total of $462 million in perpetual preferred equity.

Our preferred stock combined with an equity market capitalization of $1 billion and our $530 million in debt results in a total market capitalization of approximately $2 billion at quarter end, representing an increase of 41% over the prior year period.

From a credit standpoint, our net debt to total market capitalization was 22%.

Our net debt the securities to total market capitalization was 16%.

Our net debt to adjusted EBITDA was 5.2 times.

Our net debt less securities to adjusted EBITDA was 3.8 times.

Our interest coverage was 4.1 times and our fixed charge coverage was 1.7 times.

From a liquidity standpoint, we ended the quarter with $91 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 $35 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 line of credit secured by rental homes and rental home leases.

Additionally, we had $115 million in our REIT securities portfolio that is currently unencumbered.

The portfolio represents approximately 7.7% of our unappreciated assets.

And many of our portfolio to no more than 15% of our underappreciated assets we.

We are committed to not increasing our investments in the REIT securities portfolio.

During the quarter, we sold $2 million of securities for a realized gain of $436000.

We plan on maintaining our securities portfolio at approximately $100 million.

Our solid community operating results has increased the value of our communities.

This has allowed us to reduce our cost of capital by mortgaging, the communities and utilizing the proceeds to redeem our higher cost preferred stock.

The improved earnings have increased sales stock price now providing us with an additional advantageous source of capital.

We also continued to make progress obtaining low cost financing on our rental units.

Plan to utilize a combination of equity debt and potentially lower cost of preferred stock to redeem our series C and D. Perpetual preferred stock, which are callable in July of 2022 and January of 2023, respectively.

We have built a strong foundation on which we can continue to grow the company from the benefit of our long term shareholders.

And now let me turn it over to gene before we open it up for questions.

Thank you Anna UMH properties, Inc. Because of 53 year history of providing quality affordable housing.

Our country faces an affordable housing crisis due to a lack of construction that has pushed the price of existing houses beyond affordability per mandate.

The resulting GAAP of $5.5 million of housing units needed nationally only worsens when adding in the loss of the existing units through debt.

Obsolescence of natural disasters the.

Total housing needed then reached 6.8 million units.

The manufactured housing industry is now building less than 100000 housing units per year.

Need for affordable housing units could easily support a doubling of that production current production of lead will fill all existing vacant manufactured housing sites. This will necessitate building more than 100000, new sides of the year equaling 500, new communities of 200 sites each.

Florida the leads in both projected population growth and leave the affordable housing.

Creating a business that meets the need is financially and socially desirable.

<unk> is growing through value add acquisitions, because we were able to acquire manufactured home sites in good markets significantly below replacement cost acquire.

Acquiring communities at these low prices allowed us to make the necessary investments in capital improvements and homes the drive industry, leading returns while generating significant property level of appreciation.

We have been extremely successful in this endeavor, but our success has led to the invitation which has driven the increase competition ultimately leading to increased prices.

Prices for high quality of existing communities are now at or exceeding replacement cost.

We will still evaluate value add deals and intend to grow through value add acquisitions. We are also positioning the company the growth who newly developed communities. We are working to build relationships with developers who can deliver fully approved and developed manufactured home communities. This structure will take the approval in the.

AUM at risk away from UMH and delivers high quality vacant sites at the top.

<unk> of the closing of the communities will be revenue per home installation.

This will significantly improve our results as the time between the capital outlay and the income production will be greatly reduced.

Either of them or sell homes in these communities. This strategy will not solve the affordable housing crisis, but it certainly is the start.

We will now be happy to take your questions.

Yeah.

Thank you we will now begin the question and answer session.

To ask a question you May Press Star then 1 on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

All of your question. Please press Star then 2 and at this time, we will pause momentarily to assemble our roster.

Okay.

Yeah.

Okay.

Yeah.

And the first question will come from Rob Stevenson with Janney. Please go ahead.

Hi, good morning, guys.

So you indicated that the second quarter average price on home sales was $80000 per haul, but up materially over the probe.

The COVID-19 costs, but that pricing was also up 33% versus the first quarter level of about 60000 per home what caused the huge jump from just 90 days ago I understand versus pre COVID-19, but what happened in that sort of 90 days the jump that pricing up that much or did you just pocket of bunch more profit there.

The <unk> yeah, yeah. So the second quarter first of all we did $9.6 million in sales of that the majority of those home sales were new home sales, which are going to have a higher.

Price the the margins are certainly improving and we have been pushing for higher prices as the costs are going up but the majority of the increase in the average price of the homes was because we sold so many new homes in the quarter and are okay.

<unk> was about $103000 per home okay.

Okay. That's helpful. And then what are you seeing sort of sequentially or over the last 6 months in terms of the cost of the homes to you the stuff that youre using for rental units, how much or how much inflation are you seeing and what type of.

The difficulty in getting those.

To you is there still today of breath can answer that but I just wanted to tell you that we believe the.

They're really big cost increase from the factory, but we also believe that's relatively temporary but go ahead, Chris Yeah. Sure. So again prices are still up approximately 40% from pre COVID-19 levels.

They've certainly increased.

A little bit more but nothing too substantial that we haven't already handled so as far as the timing that's really the main concern that that I see we're able to get the rental rates, we need to justify purchasing the homes at the elevated prices but.

If we had more homes quite frankly, we could sell and rent more homes, we have plenty of inventory at the moment. We've got 193 homes on site right now that are ready for occupancy, we're getting ready for occupancy we've got 850 homes on order.

250 of which were ordered in the first quarter of this year. The homes ordered in the first quarter are starting to be delivered now so those homes and the homes. We already have on site will give us the ability to continue to generate occupancy growth in the third and fourth quarter, but it's something we closely monitor and something we certainly hope he's as soon.

Okay. So that leads me to my next question that you sort of alluded to there in terms of the pricing of the.

The rental units impact on your returns there so on a same store basis your year over year.

Rents are up 3.5%.

What is it what are you guys of achieving on.

When a tenant moves out on a new tenant.

Right because your rental rates on the same store stuff when you're passing stuff along 2 existing tenants your rental rates seem to go up at a fairly measured rate that you don't pass on double digit rental rate increases typically on an annual basis, but what are you getting when somebody moves out and somebody else moves in and Youre able to adjust that without.

Having to deal with an existing tenant.

We evaluated it on.

Community by community basis, because of the communities.

95% plus occupied in the rentals of 98% plus occupied and you get a vacant rental you can increase that rents 10% before the next tenant you judge of based on market.

Very much appreciate the positive word of mouth, we get by having a quality product available at a 40% at an affordable price and we don't want to jeopardize that but.

Whereas we only raise the rent per existing residents of 4%.

If if the home became vacant with those parameters with high demand low supply, we can increase the rent more and which generally about 10%.

That's helpful. If I could add 1 other thing I was.

Out of the gave people going on.

The internet going to other services like Zillow seeing whats available in the market you can do all of the shopping.

We believe UMH is of.

Quality of products by the substantial substantially below the competition and that differential is going further in our favor because the apartments and the home prices are going up faster than we're raising rents so competitively position is improving.

Okay, and then what you guys talked about the the development properties.

Properties that you guys are looking to acquire how big is the acquisition pipeline behind that.

But youre evaluating these days yes.

So of separated into on the existing communities, our typical acquisition pipeline.

Is empty right now we are looking at several deals, but nothing that we've got offers out of something that we're thinking about making some offers all but nothing to be updated at this time.

We've done $18.3 million of existing acquisitions. This year are 560 sites, where we're happy with that volume. We think that we can do more but again with pricing where it is there are fewer opportunities than there used to be on the.

Newly developed communities, we think we have a very strong pipeline of potential properties.

That are being developed at the moment or will soon be developed we just announced the 38 million.

And all I would say at the moment as there are several more behind that dependent on how these first few properties go.

Okay. So that leads me to my last question. So Sam it seems like given that sort of color.

Seems like good acquisition opportunities for you guys are more scarce today for you than capital is especially given where the equity is being priced today can you talk about why you would want to share that upside with the JV partner I understand if you're.

The acquisition pipeline, where the escalate the like $300 million it would be outsized relative to the overall enterprise value of the company and maybe you'd want to bring the JV partner, but even with additional development deals behind this it seems like the.

You're still going to be in that sort of call. It $100 million of acquisition range and it seems like the opportunities today are more scarce, what's the incentive here for you guys to talk about bringing in a JV partner potentially gain is going to begin that go ahead.

The the industry needs to produce and go back to where it was the.

For the years ago of back to a 200000.

The units of year, all of our communities of filling up the.

Where we've fallen a bit of who is in the if we're going to meet the affordable housing crisis, we have the build new communities and the.

The magnitude of that is of meds.

Of.

I put in my opening remarks the.

You need at least 5 of 100, the new communities of the United States of 200 spaces of piece that would be of 100000 units.

That's.

Almost insignificant in relation to the need so the reason we're bringing in the joint venture partners is not that we made jointly adventure of what was at the <unk>.

The time, but we just don't know how big this is going to get it's very hard to get approvals, it's very hard to get communities, but the demand is immense and the rewards both socially and financially it will be a very great. If we could find a way and we must find the way.

Bill of another 100000 units of you in the United States.

Okay. Thanks, guys.

Thank you.

The next question will come from Michael Zuk with Oppenheimer. Please go ahead.

Good morning.

Gene and Sam.

The outsize question are you, having any impact from the rent moratorium that's been going on across the nation.

What's the status of any rent deferrals in your system.

You can see our results are phenomenal so.

It has not had any negative impact on us.

The the eviction moratorium is being lifted we only raise rents 4%.

No.

I don't know of any.

I mean, just to add a little bit there our collections still remain extremely strong collections in the second quarter were about 98%. Our July collections finished at 95% book it up to 98% here. Shortly the main impact it's had as are the people that have not been paying since the start of the pandemic or.

Now have significant balances in the 90 plus day column is higher than we'd like it to be but when the courts open up I'm, assuming we can't work out payment plans and get these people current which is the number 1 goal of those units will be turned over and a a new tenant that will pay the rent will be in there I did want to add that our bad debt expense in our.

Allowance for bad debt and I'll write offs remain at pre pandemic levels.

Would you consider the fact that the demographics of your tenant base are different from the typical dumb demographics in our large urban area is that the reason why you are having.

Such a good success of keeping the moratorium numbers low.

Well.

I believe the success comes from.

If you were to visit our communities, which by the way anybody can basically visit our communities from home by going to UMH Dot <unk> dot com and seeing the drone videos and all of those.

The strong video is not only allow you to see the communities, but to see the progress on our expansions and to see you know you can watch the land clearing going on the homes going in all of those things, but youll find by looking at the map of our properties.

We see when we go out there and in Central Pennsylvania, there's warehouses surrounding our properties with help wanted signs of $22 per hour Nashville booming.

Indiana booming from manufacturing, Ohio, So wherever we go in and our communities where workforce housing and.

The workforce has done extremely well through Covid. That's why sales are so good that's why collections are so good rental occupancies. So good you know you look at the deal our residents have.

With with the low site rent low home rents they come to a place they get a good job paying $22 per hour and yet they have low housing costs, we have.

We run into people, who are the employers and their various towns and those people welcome us because they know.

They can't get employees unless the employees can find quality of affordable housing. So when we seek expansions or to build communities. Sometimes of our biggest advocates are the local factories warehouses and people who need a need of employment and the people who work there are as far as I can tell in every location I've been.

They're doing extremely well better than ever and that's that's what's responsible for our great results.

Well, congratulations to Jean Sam and Anna and the other staff members Youre, great stewards of the.

Shareholders equity and we appreciate your continued success.

Thank you Anna Thank you.

Again, if you have a question. Please press Star then 1 our next question will come from Brian Holland of Aegis capital. Please go ahead.

Good morning, Congrats on the 91% increase in home sales. Thank you.

It seems like the third quarter typically exceed second quarter levels is it fair to expect more than 120 homes sold in the third quarter and how should we think about the sales levels over the next 12 months.

Brett will respond more but.

From the from the time I began with UMH.

I'm going back to about 1987.

Object was to build the sales company and we had some very good years.

In 2006, we sold $16 million, where the houses and made $2 million.

From their various you know major economic factors.

Pretty much conspired against us on sales, but now everything is going in our favor and sales are growing and profitable and we see that for the foreseeable future with the only problem being the.

Difficulty in getting inventory and the increasing cost of inventory, but we also see that problem solving itself, but maybe it won't solve itself by the fourth quarter.

It may take a little longer but that problem will solve itself, but meanwhile.

The recognition of the customer of the quality of our product and the great opportunity. They have for themselves to live in a community with the amenities to live in a great house built in the factory and to do it at a cost less than 30% of their income that recognition is going to generate.

Abstentious sales growth for the foreseeable future, but go ahead Brett yeah.

I'm going to be a little bit careful in the response only because this was a record but that being said that the third quarter is off to an excellent start in line and keeping pace with the second quarter.

I think Sam hit the nail on the head of <unk> later in the quarter, we will have to keep a close eye on inventory, but at the moment I think that we are well positioned to continue to produce these types of sales results going forward.

Alright, and then what is the expected timing on the delivery of the 2 development projects in Florida.

And what led to the decision to buy <unk> development projects and how do you know.

How does the expected returns I guess can you talk a little bit about the returns and how they compare to your traditional acquisitions. So the same here I'm going to answer 1 aspect and turn it over to Brett.

You know the prices of communities per sale. Both you know, 95% occupied first class communities and even the prices of turnarounds has continued to rise.

We believe we will find more turnaround acquisitions and do more of those we also believe that there's people buying communities that don't really understand the business and eventually that will provide opportunity for us to acquire more communities, but looking at it.

The real opportunity today is in development. If you build the site for $100000 in earn more than 30000 of sales profit here in the lot for $70000 and you're going to you're going to get a strong return on that for the indefinite future. Its just going to continue on and you are going to get you there.

Rent increases and it's going to be exactly as it has historically for people who built communities. They made of fortune doing it they build their community they realized sales profit net.

The pace for construction of a lot they collect the lot rent forever thereafter, with 4% increases in over a 20 year period. The return is phenomenal and so we see that in the development.

Pipeline and building communities, whether we directly do it ourselves as we do on our expansion and we're working on the <unk> 330 space community to be built which would still not fully approved but we continue to make progress of Brussels to give you more details on our joint venture potentials sure. So yeah on the day.

Livery first of all of the first property 219 sites should be delivered at the end of this year or the beginning of next year.

At that property, we plan on hitting the ground running with a rental home program out of the box of generate immediate revenue and ultimately turnaround and try and so all of those homes. After the fact, but the increased infill right because of the rentals should result in breakeven as compared to our cost after a year or 2 and.

The yield in the 5% range after year, 3 and obviously growing every year after that sales profit only help with that equation. If we work to go with the fewer sales model. The returns are going to be better over the long run, but they will take a little bit longer to get there.

Our yields.

At the sales model will be in the 7% range after 7 years and a total return including appreciation will be around 70%. So that's.

What we're going for here and we think based on the markets. We're looking at in the future of potential development deals. We can expect to find properties in similar locations, where we can do this over and over again and that's certainly the goal of the second property.

I'll be delivered at the end of 2023.

Our 2022, I'm, sorry next year from a year ahead of myself.

<unk>.

Alright, Thanks for that color and then last 1 from me can you talk can you talk about the current labor environment are you, having issues finding and retaining labor.

Yes, it's an issue it's an issue on in every industry with that we've spoken of anybody involved in it. So main problem. We see is on the maintenance side of it is driving increased wages, but we're paying wages for people with skills that should become long term employees and help from those properties for years to come.

We're getting through it I mean, we're we're properly staffed the properties are running well, we certainly haven't had to give up in quality because we can't find good maintenance people. So it is an issue and it will remain an issue for a little while but.

We will get through.

Alright, Thank you and congrats on the strong results.

The next question will come from Craig <unk> with B Riley FBR. Please go ahead.

Yeah. Thanks, good morning.

Another very strong same store quarter can you comment on the operating expense side.

Just sort of a sense of what the increase was in taxes versus the other property expenses and are you expecting a pretty decent increase in property taxes. Later this year, just given the increased value of the portfolio.

On taxes, we had a small increases but the the normal increases the major increase in taxes come from our rental homes because again, we added so many rental homes over the last year ended the year on.

On the expense side.

We stabilized our expenses pretty much.

We do visit the community. So there wasn't increase in expenses there we did have a store.

Weather related Additionally expenses.

So those of the things that really added to expenses this quarter as well as the year to date.

Just got it so I feel like Oh go ahead, I'm, sorry, I was going to say.

We did expect expenses to increase over last year because of the things Anna mentioned I think we had said expenses were expected to rise of about 5% of we came in at 6%. So we're actually right in line with where we expect it to be on the expense side I did want to add 1 thing. We did have an increase in our insurance made to again I think that was across the book.

Good for everybody because of the has been going on with Covid.

Got it so it doesn't sound like the I feel like in years previously you had.

Or sort of indicated that you might have a pretty meaningful increase in your property taxes, just given the rising values of the the land, but it doesn't sound like that's what you're expecting here as we get into the back half of 'twenty 1.

Now it seems like it's pretty stable right now.

We have our normal increases I've not seen anything come in that way other than that.

Got it.

And I'm going to pivot and talk about the development pricing are at about 105000, a site I know the when you look at the vacant land that you have for expansions. That's typically at a cost of closer to the Saturday is there any way to push that any harder or is that really driven by the entitlement process.

Do you want me to say Yeah go ahead, yeah, so that.

The pricing of 105000, the site is all the way, including the pad for the home, which a lot of times you know you Gotta make sure Youre talking about the same thing. So that is a fully approved developed site ready for home. It is more than what we talked about in our existing expansion language, we typically say around $70000 of side. It obviously.

Depending on the topography of the land clearing.

Gentlemen process of legal that goes into it so.

While it is a little bit more than we could do it ourselves. We also have the benefit of getting sites that are ready to generate income immediately rather than buying land going through the process. The.

The cost of holding the land before it starts producing income.

The developers that are out there doing this are entitled to earn a profit on it and that's where the pricing comes in where it is I do expect the.

The ultimate end of price to be a little bit lower than that as we go through the development plan and make some tweaks, but as its contracted right now or the $105000 of site and I'll just add.

Decades ago, when a person built the manufactured home community. They recovered 100% of the cost of a lot from the sale of the home.

And with the housing shortage being as bad as it is us picking great locations.

We don't know what the profit margin will be on the sale of those homes, yet, but it does have the potential of.

$100000 is not that much anymore today, and when you look at the finance costs of $100000 if interest rates come down for the retail sale of manufactured homes, which were working on.

That could come down in half if that comes down in half of person makes the same monthly payment on buying 100000 dollar of home in the futures of $50000 House today, and there's a real possibility of that could occur which would mean, we could recover 100 per cent of the cost of the lot on the sale of the home.

We're working with Fannie Mae Freddie Mac.

Working with HUD.

HUD, we're working with everybody to reduce with the retail customer pays in finance costs.

May I add that we're trying to develop.

The other housing at an affordable price.

I always tell the anecdote about the asking of the real estate book of what did you get per 250000 of good events in the home.

But nothing you would rather live in.

So oh private is the.

Superior.

The quality and Oh, we hope to sell it at a profit and still provide the customer.

With the very very competitive.

With 1 of.

The live with us.

Why now.

The thing about 3 bedrooms 2 baths.

And the.

A really good product so, but it is quite an undertaking and the.

It's easy the right number of something of a piece of paper that's easy to do our plants, you really need the great staff of people.

All of the people to make this work.

The it's a very ambitious project so the the execution.

It is always difficult and the but we want to do it and the length of devote the resources to do other than we think we can bring in quality of partners with us on the.

This.

National need for affordable housing.

Got it and just given the demand and sort of what you're looking at from an expansion perspective do you anticipate having to open up any additional sales centers like you had to do and over the past several years or are you pretty well set up as you see it today.

The objective remains with our existing communities to do outside land home sales, which which can incorporate the community has the vacant land and the property on the highway the ability to do of sales center, but it can also be done without of sales center just by people coming in the office going on the Internet seeing what we have and we could.

Potentially do more land home deals at more locations.

Yeah.

Got it and just 1 more from me can you remind us of.

What the vesting period is for the the Fannie Mae financing bonus.

Scott.

It's about 3 years.

Okay, Great alright, Thanks, I appreciate it no problem.

Okay.

The question.

Oh go ahead Sir.

No go ahead of you go ahead. Thank you.

This will conclude our question and answer session I would like to turn the conference back over to Mr. Samuel Landy for any closing remarks. Thank.

Thank you operator.

I want to thank our maintenance workers are office workers are managers regional managers, Vice President and Chief operating officer, and the chairman of our board for leading US here to these incredible results I would like to think of 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 November with our third quarter 2021 results. Thank you.

The conference has now concluded.

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