Q1 2022 UMH Properties Inc Earnings Call
The format of 1995.
The forward looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties.
Although the company believes the expectations reflected in any forward looking statements are based on reasonable assumptions. The company can provide no assurance that its expectations will be achieved.
The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the Companys first quarter earnings release and filings with Securities and Exchange Commission.
The company disclaims any obligation to update its forward looking statements.
In addition, during today's call, we'll be discussing non-GAAP financial metrics.
Reconciliations of these non-GAAP financial metrics to the comparable GAAP financial metrics as well as explanatory 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 us today Eugene Landy Chairman.
Samuel Landy, President and Chief Executive Officer.
And Ah Chew, Vice President and Chief Financial Officer.
Brett Taft, Vice President and Chief operating Officer.
Jim Lykins, Vice President of capital markets.
And Daniel Landy Vice President.
It is now my pleasure to turn the call over to <unk>, President and Chief Executive Officer, Samuel Landy. Thank you very much Nelli. We are pleased to report another solid quarter of operating and financial results are normalized <unk> was <unk> 17 per share, which was a decrease of 15% year over year. However.
Our 2022 earnings will be weighted towards the second half of the year as we are poised for future earnings growth through the recapitalization of our $247 million of 675% series C preferred stock we have opportunistically been accessing the capital and debt markets in anticipation of our future capital.
Needs. We currently have over $290 million in cash and cash equivalents available for the redemption as well as for other investments and acquisitions expansions rental homes and our joint venture.
Our first quarter normalized <unk> was substantially impacted by the carrying cost of the capital required to fund the recapitalization of the outstanding preferred without the series C preferred stock dividends in the first quarter, our normalized <unk> would have been 25 per share or an increase of 18.
A sense sequentially and 30% over last year.
Given the volatility in the market and rising interest rates. We are pleased that we have already raised the capital required for this redemption. We also have additional capital and availability on our lines of credit to fund our growth initiatives.
Demand for housing remains strong in our markets. Our communities continued to experience waiting list for rental homes, and we are seeing healthy demand for home sales. Our overall occupancy rate increase from 85, 2% to 86% year over year, and our rental occupancy rate remains above 95%.
Total income for the quarter increased 6% to approximately $45 $9 million.
This increase was the result of a 7% increase in rental and related income and a 3% decrease in sales of manufactured homes.
NOI for the quarter increased by approximately 9% as a result of our recent acquisitions and the addition of rental homes, our operating expense ratio improved by 80 basis points year over year from 44, 3% to 43, 5%.
Same property NOI increased five 3% or approximately $1 $2 million over 2021. This increase in NOI was the result of increased income of six 6%.
And increased expenses of eight 4%.
Same property occupancy increased 70 basis points to 86, 7% or 200 occupied sites over the last year and we obtained site rent increases of approximately four 9% and home rent increases of four 7%.
Our expense increase is attributable to rising personnel costs tree removal water and sewer increases and real estate tax increases we anticipate that the elevated expenses will be offset by income income growth as we are able to procure inventory for Brent and for sale and achieve our annual rent increases.
Yes.
The biggest challenge we face is obtaining rental homes to drive our occupancy and revenue gains during the quarter. We added 52 homes to our portfolio, bringing our total portfolio to 8800 rental homes. We currently have over 1300 homes on order of which 300 have been delivered and are in various stages of <unk>.
Setup.
The backlogs remained long, but we're starting to see some easing in certain markets and regions. Our rental occupancy rates remained strong at 95, 3% and our monthly rent per home increased four 9% to $839 per month.
Additional occupancy should absorb the expense increases and provide profitability once the supply backlog is resolved.
Gross sales for the quarter were $4 3 million, representing a decrease of 3% over the same quarter last year. During the quarter. We sold 61 homes of which 27 were new home sales and 34 were used home sales, while our sales volume decreased slightly our sales profit increased.
Improved substantially from a loss of 237000 last year to a profit.
This quarter. This was driven by an increase in our gross profit from 21% last year to 30% this year.
Demand for sales remains exceptionally strong and we are offering financing for our customers at $4, 99%, which is in line with conventional mortgage rates.
We financed 55% of home sales during the quarter, we anticipate sales growth throughout the year as we obtain inventory from our manufacturers.
We continue to make progress on the expansion front and expect to complete the development of approximately 400 expansion sites. This year. These sites are well located some of our strongest sales markets over the next five years. We believe we can develop 400 or more sites per year or 1800 vacant acres can be developed into seven three.
<unk> hundred sites, giving us a meaningful runway to continue to grow the company organically for years to come.
During the quarter, we acquired one community in Western Pennsylvania, containing 96 sites of which 83% are occupied for a total purchase price of approximately $5 8 million.
Subsequent to quarter end, we completed the acquisition of another community and Western Pennsylvania, containing 132 sites of which 70% are occupied for a total purchase price of $7 4 million.
This community also has 18 resident owned lots to pay HOA fees and another 38 entitled lots for future development.
We currently have an acquisition pipeline of two communities containing 490 sites for a total purchase price of $25 9 million or <unk> $53000 per site.
The acquisition market remains competitive and cap rates remained very low in a rising interest rate environment. We continue to seek opportunistic acquisitions and are on track to meet our goal of acquiring $25 million to $50 million of communities. This year.
We are pleased with the progress we have made at Sebring square, which is the newly developed community acquired through our joint venture with Nuveen Real estate, we have 11 homes onsite with several sales under contract. The second property in Sebring is currently under construction.
And we expect the property and Punta Gorda to begin construction in coming months, we have a strong pipeline of potential new development deals and believe this has the potential to become a very exciting and profitable part of our business.
We are developing high quality communities that are more affordable than most housing alternatives and just about any market existing acquisitions and strong markets of decent quality are trading above replacement cost.
Developing new communities will allow us to have the highest quality communities at the best prices.
Our joint venture allows us to limit the short term impact to <unk>, while building a high quality portfolio of communities growing our pipeline of future acquisition opportunities for UMH and earning fees along the way.
<unk> is well positioned to outperform the market, we have internal and external growth opportunities through the infill of our 3400 vacant sites increased sales and finance profitability development of expansions acquisition of existing communities Greenfield development through our joint venture and the recapitalization of our outstanding.
Preferred stock.
While earnings did not rise this quarter as a result of rising raising capital to redeem our series C. Preferred we are confident that throughout the remainder of the year, we will see operating and earnings growth in line with previous years and now Anna will provide you with greater detail on results for the quarter.
Thank you Sam funds from operations or <unk> was $8 $5 million or <unk> 16 per diluted share for the first quarter of 2022 compared to $8 $4 million or <unk> 19 per diluted share for the prior year period.
Normalized <unk>, which excludes nonrecurring items was $9 million or <unk> 17 per diluted share for the first quarter of 2022 compared to $8 7 million.
Or <unk> 20 per diluted share for 2021.
Rental and related income for the quarter with $41 6 million.
<unk> to $38 $7 million, a year ago, representing an increase of 7%.
This increase was primarily due to community acquisitions. The addition of rental homes and the growth in occupancy.
Community NOI increased by 9% for the quarter from $21 6 million.
2021 to $23 5 million in 2022.
Sales of manufactured homes for the quarter decreased 3% from $4 4 million in 2021 to $4 $3 million this year.
Our average sales price was $70000 with new home sales, averaging $95000 and used home sales averaging $51000.
The gross profit percentage was 30% this year compared to 21% a year ago.
Sales profitability increased to $103000 and net profit this quarter compared to a net loss of $237000 a year ago.
As we turn to our capital structure at quarter end, we had approximately $615 million in debt of which $474 million with community level debt mortgage debt $42 million with loans payable and system and $99 million was our newly issued.
$4 seven 2% series a bonds.
93% of our total debt is fixed rate.
The weighted average interest rate on our mortgage debt was 378% at quarter end compared to 381% at quarter end last year.
Weighted average maturity on our mortgage debt with five two years at quarter end and five eight years last year.
We had a very busy quarter in both the debt and equity markets as we prepared for the upcoming redemption of our $247 million, 675% series C perpetual preferred stock.
During the quarter, we utilized our common ATM and sold approximately one 6 million shares of common stock at a weighted average price of $24 59 per share.
Generating gross proceeds of $38 9 million and net proceeds of $38 4 million after offering expenses.
Subsequent to quarter end, we sold an additional 739000 shares of common stock through the ATM at a weighted average price of $24 32 per share.
Generating gross proceeds of $80 million and net proceeds of $17 7 million after offering expenses.
We also successfully completed an oversubscribed bond offering raising $102 $7 million with net proceeds of approximately $98 7 million.
The transaction was completed in Israel, which afforded us some distinct advantages.
Despite rate increasing during the process, we obtained a favorable rate of 472%, which is unsecured with a term of five years.
Leading the offering included going through the process of obtaining a rating from S&P in Israel, we created the <unk>.
Double a minus and UMH, a plus at the corporate level.
We also completed the addition of approximately 1100 rental homes to our Fannie Mae credit facility for total proceeds of approximately $25 6 million.
This is the first time that the Gse's have finance rental homes and communities that are not entirely comprised of rental homes.
We have approximately $388 million of rental homes on our balance sheet that may now qualify for highly competitive financing. This.
This could be an important source of capital for us going forward.
We currently have $292 million of cash and cash equivalent which will be used for the upcoming redemption of our $247 million, 675% series C preferred stock general corporate purposes, which includes the purchase of manufactured homes for sale or lease to customers expansion.
Of our existing communities paying down variable rate debt and acquisitions of additional properties.
We have $50 million.
Available on our credit facility with an additional $50 million potentially available pursuant to an accordion feature.
We also had $46 $5 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.
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 3 billion and our $615 million in debt results in a <unk>.
Total market capitalization of approximately $2 4 billion at quarter end, representing an increase of 32% over the prior year period.
From a credit standpoint, our net debt to total market capitalization was 13, 5% our net debt less securities to total market capitalization was 11, 1% our net debt to adjusted EBITDA was three seven times, our net debt less securities to adjusted EBITDA.
With three one times our interest coverage was three seven times and our fixed charge coverage was one six times.
Additionally, we had $57 million in our REIT securities portfolio unencumbered.
This portfolio represents approximately three 3% of our unappreciated assets we.
We limit our portfolio to no more than 15% of our underappreciated assets, we are committed to not increasing our investment in the REIT securities portfolio.
On February 28, 2022, the merger between <unk> and LPT was completed with $21 per share.
UMH owns approximately two 7 million shares of Merit and received approximately $56 million generating a realized gain of $30 7 million.
The funds that we received from the <unk> sale will be used for the upcoming redemption of our $247 million, 675% series C perpetual preferred stock and for general corporate purposes, including in addition to the proceeds from our common ATM and bond issue in Israel.
With our 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.
Demand for affordable housing remains at an all time high and we are working every day to increase the supply in the markets we serve.
We are doing this through investments in underperforming communities with the development of our vacant land and to the investment in Greenfield development through a joint venture we.
We have made substantial strides on the financing front. So the addition of rental homes to our family May credit facility.
Rental manufactured homes provide consumers with the affordability benefits provided by our product type without a long term commitment.
Competitive financing from the Gse's allows us to finance these homes and invest the proceeds in additional projects to further increase the supply of affordable housing. This will not only benefit UMH with the entire industry and our consumers. These projects and our mission are crucial to the overall health of the house.
<unk> market.
Our business plan has required us to purchase upgrades and infill underperforming communities at the time of acquisition. Many of these communities were not firm answer both because of the low occupancy rates and poor quality. These.
These communities were acquired utilizing preferred stock as we have turned the communities around improved operations and generated value. We are now able to issue equity embedded much slower rates to retire the outstanding preferred series. We are proud to have received an investment grade rating of a plus from S&P global.
Earnings Mohan and Israeli creating credit rating agency.
We are in a position to redeem our $247 million of 675% series C. Perpetual preferred stock. This July given that we have the capital required for redemption OLED accounted for quarterly <unk> will increase by approximately eight per share not including the benefits of further income gain.
<unk> through operations.
With our recent acquisition UMH now owns a 129 communities containing 24200 developed homesites and one community containing 219 sites and our joint venture with Marine we have a strong stable business with avenues for future growth. We can continue to grow earnings too.
The accretive recapitalizing about outstanding preferreds, the infill of our Bacon sites growth in our sales operations in future acquisitions and development opportunities. We look forward to implementing a proven business plan across the nation to provide additional affordable housing while generating long term value.
Best in class returns for our shareholders.
Thank you.
We will now begin the question and answer session to ask a question you May Press Star and then one on you touched on phone.
Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Kitan Caro Aaron Berg. Please proceed.
Hey, guys. Thanks for taking the questions maybe first just give us a bit more color on home sales in the quarter. What do you think demand looks like in the coming quarters, and what's going to be a good run rate going forward and just kind of finally, how much of an impact its supply chain paperboard sales could have been in the quarter.
Yes, I think the decreases small really.
Based on timing of sales because you don't exactly have control of one sales close.
As well as.
The time it takes to get a person of custom ordered home so.
Everyone, we talked to out in the field demand for both rentals and sales is stronger than ever and to the extent there is.
Any issues, it's strictly on the supply chain, Greg anything you want to add to that.
Yes, sure. So I would just add that the first quarter. Historically is one of the slower sales months of the year.
We were largely in line with where we were last year, a decrease of 3%, but the profitability was up from something like a loss of 247000 to a gain of 106 in the first quarter sales for the second quarter continued to trend in the right direction and at the moment, we actually have over $3 5 million sale pending so.
In discussions with our VP of sales.
And we believe that we will be able to outpace sales growth from last year, we did $27 million last year excuse me and we're targeting $30 million for this year. So.
Lot of that will be largely driven by the amount of inventory and the timing of when that inventory is.
Receive but we have the homes on order they are being delivered every day, we're setting up those homes and we anticipate future growth both on revenue and sales.
Got it maybe shifting gears here a little bit just kind of anecdotally are you guys seeing any direct impact on inflation re residents health payments and trending year to date versus historical levels.
Yes, Brett.
But I know.
Yes.
Yes.
Yes go.
Go ahead or in line with our historical norm, there really hasn't been any change there of course, we're concerned about inflation, but that being said collections remain over 98%.
Things are very good on that front, we monitor it very closely and if anything changes, we'll let you know, but from where we sit there is plenty of demand for our product.
Really able to get people in the court system now and turn over units that people had not been paying Bryan Dan. So we're confident about the collections now and going forward.
Got it and just one final one for me.
Just kind of longer term how have your expectations on expansion.
I guess first how they trended relative to previous years and kind of what's the outlook going forward.
Our approvals are going very well in terms of we will build 400 lots this year and next year.
We.
<unk> continued to work on many projects at the same time, the only challenging projects or New Jersey, Eastern Pennsylvania, and Eastern New York with those exceptions as.
Expansions, we are able to get the approvals and we have strong waiting list right now for rentals.
Many communities people tell me about <unk>.
<unk> home.
Personal waiting lists for rentals in one community. So the waiting lists are very substantial well building expansions and.
We were slowed down a little bit.
This quarter because of the delivery of homes, which we anticipated we spoke about it last year, but the homes are coming in being set up and we should go forward. We have about 3500 homes on order of which 300 are in <unk>.
Various communities and in the process of being setup.
As everyone.
This every day.
<unk>.
The housing situation is.
State of crisis in the amount of shortage and the projections are that we need to build more homes in this country.
Hello.
Unit.
Sales to construction right over 1 million six units and we may need as many as 2 million units a year. So that we have to increase the number of units.
We're producing both conventional and manufactured homes and we have to makeup both make up the shortfall, which was <unk> 4 million units.
For the industry our goal is the goal.
100000 units a year to 200000 units a year that's quite a.
That's quite a difficult task given the supply chain.
Lease rates the labor market, but historically this industry has produced 250000 homes a year.
We think the industry can double to 200000 homes a year in UMH is committed to.
<unk> for the industry.
As many as 500 communities of 280 to 100000, new units, which has to be built in the last 20 years, we haven't built any new communities statistically.
But a few built and where we're trying to change that.
The creative affordable housing that's badly needed. So we're very very optimistic.
<unk> can participate in the solving the housing crisis and that we can.
Grow the company substantially over the next decade.
Great. Thanks for the time guys.
Thank you for your question.
Our next question comes from Rob Stevenson with Janney. Please proceed.
Good morning, guys.
Just to follow up and of the 1300 homes on order or is that just rentals or does that include for sale units as well.
I believe it includes both.
Okay perfect.
No.
Sam what are they telling you. These days in terms of when youll be getting the majority of the thousand homes that you have on order is this ratably on a monthly basis is there a sort of peg that goes through the Python and maybe the fourth quarter or do you get a disproportion amount.
How is that sort of working and how reliable are they when they give you timetables today, given the delays of material labor shipping et cetera.
Brett can be more specific so go ahead Brett.
Yes, sure. So we're receiving inventory at our properties every day.
It will be a good amount of homes coming in on a monthly basis. We believe that we're going to get 700 800 homes. This year delivered we've got 300 onsite now which should come online sometime during the second quarter and boost those income.
Numbers.
Additionally, we should get two to 300 homes in the second and third quarters, which will also come online. So we are hearing about some easing in the backlogs factories in the northeast and the Midwest are still in that 8% to 12 month range. However, there is a few manufacturers we're working with in the southeast that are able to get us homes in about three months.
We're evaluating where they can ship to what the freight costs are what Brett levels, we can achieve to try and expedite the delivery of some inventory from some manufacturers that do have capacity so were.
We're making progress there.
And we do expect to get those seven to 800 units. This year and I guess just to point out something about the same store NOI numbers same store NOI income was up six 6%.
Largely driven by our rent increases of four 9% last year for the first quarter had increased occupancy year over year by 750 overall site. This year. It was 208 sites. So and again, we've mentioned we've got very strong demand at the property certainly demand to fill the equivalent that we did last year.
550 sites comes in at about $1 3 million in income, which would put US right in line with that high single digit NOI growth or low double digit NOI growth. So we're confident about the outlook on the same store numbers going forward.
Okay and then.
I mean, given the difficulty in getting rental units on site are you thinking about how aggressively you pursue your sort of typical returning sort of plan with these new communities are requiring like Mandel trails is like 70% occupied typically you for some of the Eyesores an older product out and it's driven Aki.
<unk> down for some period of time, and then you've used the rental units to bring it back and produce a stronger community overall, but that takes time and it takes rental units. If you don't have the rental units does that sort of alter your equation as to how you sort of do these things once you acquire them or do you still continue with running from the same playbook.
This is Sam here.
Running from the same place.
Yes go ahead Brett.
We continue running from the same playbook and weak.
<unk> received word from the southern manufacturers that they can.
Deliver into Pennsylvania, and Ohio, and so we believe we're going to.
Reduce the problems of the supply chain shortly but even.
Even if they were to stay the same we would continue to buy communities upgrade M&A add rental units and its buy and upgrade first and add rental units second so thats not going to change.
And then Sam did I hear you correctly in your comments that you're offering sales financing at $4 99 on new homes.
That is correct yes.
So that's basically where the where the Freddie Mac 30 year.
Single family mortgage rate is today.
We're very proud that we reduce the cost of financing to the same as mortgage rates were working directly with.
Freddie Mac trying to create new programs that will continue to benefit our residents and people who want to purchase manufactured housing.
Made to.
Two incredible breakthroughs of one having communities with up to 60% rental homes financed by Fannie Mae and two having Fannie Mae directly finance the rental homes and we're seeking to create additional programs that would further benefit people who purchase manufactured housing rent manufactured homes.
Okay, but if I'm not mistaken I mean, typically the spread has been for manufactured homes versus single family homes because of the land component has been anywhere from four to 700 basis points or more in terms of the financing rate and now it's basically.
Through this financing you've been able to collapse it basically on top of one another my thinking about that correctly.
Well because UMH owns and operates the communities, we're better at operating managing the loan than anyone else and for those reasons, we pass the savings on to the resident this increases sales because your people 55 and older are rate conscious they want to understand.
Why does this products command, a higher rates than conventional homes and our ability to reduce the rate to the same as conventional homes makes our product far more desirable and I look at whether youre talking about tractors boats trucks rvs, they're financed at low cost, which increases sales increases the amount of lots III.
And so.
We are working on financing at a low rate the rate and some leases slightly above our cost of capital, whether we're issuing equity or our debt cost.
$4 99 is over those Mount and so we earn the sales profits we earn the lot rent and we earn something on the finance.
Okay, and then last one for me and then other than the Monmouth shares being acquired during the quarter did you guys sell anything of significance out of the securities portfolio. The dividends increased almost a half a million dollars from the fourth quarter level and just curious as to what the whether or not this 780000 a quarter run rate is is it good.
Run rate going forward, whether or not it's even lower given additional sales how should we be thinking about that.
We have not had any additional sales some of the companies that had stopped their dividends that it had we started with dividends. So that's the reason for the increase in dividend.
Okay. Thank you.
Thank you.
Okay.
Thank you for your question.
Our next question comes from Greg <unk> with B Riley <unk> Securities. Please proceed.
Hey, good morning, guys I appreciate the commentary on the rise in same store expenses Sam in expenses overall, but.
Just given a higher inflation environment, where many of your multifamily and single family peers are pushing rents.
At or near double digits are you looking at raising rents, perhaps more aggressively going forward or still considering kind of the 4% to 5% range to be correct.
Yeah. So first our expense ratio declined again, so thats a very good sign had we added the rental units that there is demand for.
Our income would have grown more similarly to last year and to.
To the extent, we can continue to keep rent increases at approximately 4% I think it is very good for UMH. It's good for our relationship with the GSE.
It creates a better product.
Because UMH is large 24000, homesites 8800 rentals.
We can make additional money by growing whereas the additional where the small community owner.
They don't have that option when prices go up they have to raise rents we don't need to win this improves our competitive position, we create a further gap between ourselves and apartments in conventional homes and other manufactured home communities in the greater that cap is the easier it is to fill our 33 vacant sites to maintain.
Pain, 95% rental home occupancy, 98% collections, so to the extent possible I would like to keep the rent increases at the 4% area.
We'll judge that quarter by quarter month by month, what the expenses do but at this moment because I believe any.
Decrease in the.
And the growth of our profits.
Is strictly due to the fact that we couldnt get rental homes quick enough I would continue with the 4% rent increases and just we have to get more homes.
Okay I appreciate the color there.
Okay, and then can you give us a sense of how much operating expense.
The increase was related to tree removal and sort of more onetime expenses versus perhaps increases in real estate tax and other sort of operating expenses that are more on a recurring basis.
As usual in the first quarter, there are additional tree removal expenses as well as.
As well as a snow removal et cetera.
I don't have the exact numbers, but we did have an increase in salaries and operating expenses probably about in the 6% range.
So that did increase a little bit we had waste removal and the water and sewer but.
Tree removal I would say I would say a lot of the of the expenses are related to.
More permanent versus.
The one time items.
Because you did a great increase in real estate taxes, because of the increase in number of homes.
Got it.
And does this change in inflation and interest rates does that change, how you're thinking about underwriting and maybe how aggressively pursue new greenfield development versus maybe pivoting back and waiting and seeing if the acquisition cap rates start to back up or are you still feeling just as strongly about the new Greenfield as you were maybe three to six months ago.
Greenfields complicated.
We want to do it we want to grow it has to be good location and it has to be that it.
It's going to work we've always wanted to.
<unk> the capital at risk, which is why we have the joint venture with Nuveen.
Historically higher interest rates mean, a greater demand for <unk>.
Manufactured housing the higher rates go.
Sure it emphasize.
The affordability of our products compared to conventional housing so I would believe that the higher rates mean greater demand.
But we still.
There are there are more deals than we try to do on the development front and even on the turnaround front, but we're very conscious of redevelopment deals and new construction cost money for three to five years, you won't have positive income and so we've.
Always intended to limit how many of those deals we do.
We don't expect that the cost of housing is going to go down.
The builders are reporting 15, 20% increases in costs.
Land values going up dramatically.
And there's a need for housing. So this is the time for us to engage in Greenfield development or basic business of buying.
The products that need redevelopment and we're going to do that aggressively.
We don't look at short term.
<unk> financials.
Yes interest rates go up and becomes.
<unk> to us, but actually interest rates are still negative in the sense that you have home values going up.
The 18% 20%.
The <unk>.
Inflation is seven 8% a year and everybody is getting excited that mortgage rates.
Conventional homes are now up to 5%.
Buying a home is still critical deal if you have 7% inflation and home values are going up 20% of the 5% mortgages boutique not as steep as it was when it was two and three quarters so that we.
We don't look at.
The our margins are really down we think is a tremendous time for us to participate in a very large business to providing portable housing and we have the joint venture and other means we're going to get long term patient capital and we've made a lot of money over the last five.
Yes.
Even more money over the next 10 or 20 years as we catch up for the shortage of housing in this country.
Yeah.
I appreciate you're a big picture there.
One more for me and I think you already answered this but I just wanted to confirm it are you pretty confident that youre going to be able to deploy seven to 800 units as you've as you've done in the past it certainly sounds like and I just want to circle back on that just given the amount of inventory that's coming in month to month.
Yes in 2022, if we're able to get.
700, 800 homes, we have places to put them and we have we.
We believe demand to rent them, yes.
Okay. Thanks.
Thank you.
Thank you for your question.
Our next question comes from Brian Holland, and <unk> with <unk> capital. Please proceed.
Hi, guys. Good morning, and thanks for taking my questions.
Can you talk more about the Fannie Mae credit facility.
$380 million in rent goes on the balance sheet, how much financing and at what rate and LTV is available to you for these rentals and what does the timing look like.
Well right now what they are doing is we had a mortgage that closed back in 2020 on 28 communities, where we received the $106 million at.
At $2, 72%.
Sorry, $2, 61% of them can be incorrect.
So the more the polls that relate to those mortgages or to those communities that was in that mortgage is being placed into that.
Our line of credit so that is the 1100 homes the $26 million and that was at I believe the LTV was about 55%.
And we are working with the.
Fannie Mae's and that and the Freddie Mac to try to include these homes on.
<unk>.
That are being loaned against previous mortgages that are being in previous mortgages to be able to include them into a new Fannie Mae facility or a new mortgage so we're working with the gse's out of that.
And I think I think part of the question was on the existing rentals, we find it we have a loan of $25 million at four point.
Four points to 25% annualized. Thank you four five per site and so were hoping that we can grow that weather.
The homes are in Fannie Mae finance communities or not the current scenario is they will finance.
They will finance homes and communities. They have the mortgage on will they finance homes and communities. They don't have the mortgage on and we're trying to find out whether or not we can do that.
And we do have other Fannie Mae mortgages. However at that time, they were not financing the homes. We have just had some finance the homes of these 1100 homes.
Yes. Thank you for clarifying that that's helpful.
Can you talk a little bit more about your overall geographic expansion plans.
You've started to move into some additional states outside of the northeast do you have a scale outside of the northeast and if not like when do you kind of see that.
<unk>.
Well, we're working on three deals in Florida, which will give us a nice presence in.
Central on the northeast.
Look of Florida.
And we have.
<unk>, Alabama in Sumpter South Carolina.
The object is to grow in the southeast and really anywhere else the acquisition market.
Remains extremely tough, we'll see what happens, but UMH has.
Incredible confidence in our business plan of buying older communities upgrading them and adding rental homes and.
Additional rental occupancy generate additional sales so.
We have to find more communities were opened to more states.
What are the one of the secrets of UMH.
His greatest the properties are the homes are we've built an incredible staff with incredible experience. When we went down to the Sebring Grand opening and we had our regional managers from all over all of our communities come down to Sebring, and we had our salespeople and you could watch them selling homes.
Looking at the construction, we have just an incredible team that can go train new people. So we can grow in other states, we have to find the acquisitions, but if we find the acquisitions.
Our ability to properly trained people create community managers salespeople.
I think we have incredible ability to grow because of how many people have been with us for a very long period of time and know exactly what UMH wants to do and how to do it.
Just just to add we do have and have had a great team in the south for a while so we have a pretty good of the selloff in Tennessee.
Yes.
Thanks, and just one.
Follow up to that.
You mentioned acquisitions and availability of acquisitions.
Just real quick I guess with interest rates rising have you seen sort of acquisition cap rates starting to move up.
Nothing has occurred yet, but I do.
Agree that it has potential for occurring and that there is the potential there'll be more acquisitions.
Some of the deals we've seen.
I would say that other people do not understand how difficult turnarounds are to do and they're not doing them as quickly as they anticipated. So deals we've turned down because other people paid more for them.
Don't think that they're having the success that we would have had and its taking them longer. So I think that there is a potential we will see more deals.
Okay.
Alright, Thanks, guys I appreciate it.
Thank you.
Thank you for your question.
Our last come last question comes from Jay Mccanless with Wedbush. Please proceed.
Hey, good morning, Thanks for taking my questions.
And congratulations on getting Fannie Mae it across the finish line I guess, how long or what's the holdup with Freddie Mac getting in getting with the picture in doing the same type of lending that Fannie Mae has started to do.
We hope that they do but again with governmental entities, we don't know how long it will take them to have to go up the ladder. So I don't know what the status of that would be they just recently had a four part government's series that MH I did the.
The manufactured housing Association, Dr. Leslie Goose, the CEO and they have government officials and Fannie Mae and Freddie Mac pertaining to lending.
I think the last call on that is tomorrow. So and then we have homes on the hill coming up in Washington D. C. And so people are very actively working on creating new programs for manufactured home lending through both Fannie and Freddie in UMH is directly working on those things and.
Good thing is because it's Fannie and Freddie they are in competition with each other cell hopefully when one does it the other way.
Soon follow.
Please sir.
And then.
Was encouraged to hear about the 499.
Mortgage rate that you're offering your customers, but if you look at the competition out there whether it's.
Non bank for a bank lender, that's offering chattel financing what type of rates and what type of competition are you seeing right now.
Brett Daniel to me I would say that.
A low number for a perfect credit score is $6 99, but what do you see Brexit is there more.
I mean, that's exactly what I was going to say, Sam and that would be a perfect credit and rates are rising that number's, probably increasing at the moment.
Generally what youre going to see is right when the 8% to 10% range.
And that's one of the reasons why we wanted to get out there and offer attendant competitive rates I mean, we've got access to lower cost financing were able to pass that affordability onto our tenant.
Good for the company, it's good for the industry, it's good for the country.
It's really an ESG practice in a sense. So we're very happy that we're able to do that and assuming we can continue to get.
Lower cost financing, we hope to be able to pass that along to our residents in the future as well.
And Daniel should mentioned, how low rates are affecting our brokered home sales.
We also.
We recently did a program where we are financing resident homes in our community that are for sale and I know for the quarter our brokerage income.
Increased pretty.
Pretty well because of that broker financing program.
A lot of positive reception and our residents are happy knowing that they ever plan to move out in southern unit, we will help them with getting a customer finance.
Theres been cut.
Customers are happy.
One of the main differences with the room rates were very interested long term short term.
Customers to be happy.
Satisfied customers in a market that's expanding.
Our ability to produce housing for about 250000, a unit compared to 350000 for the conventional <unk>.
Ability to ramp.
$800 a month for three bedrooms, two baths compared to 1100 to 40.
Competition.
We're able to profitably do this.
The market's strong we're very optimistic.
<unk> can grow into a quite a substantial successful company.
That's great color. Thank you.
And then the last question I had.
So glad to hear that Youre getting.
Potentially more homes from the manufacturers, but.
That's spread between three months and the south in the eight to 12 months in the northeast.
Pretty widespread.
Is it a lack of labor in the northeast stores or something else going on.
Letting them from delivering any faster.
It's everything labor parts.
Even even truck driving regulations that affect how many hours somebody could be on the road to move the homes. So every everything out there has affected.
The manufacturer's ability to deliver houses, but again.
Manufacturers are increasing capacity there.
They are building new factories.
The reconfiguring existing factories.
And so we we have contacted.
People at Caf co champion Clayton and told them, where we need houses and people are working on creating the supply for us.
Great to hear thanks for taking my questions and great quarter.
Thank you.
Yes.
Thank you operator, I'd like to think that 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 hope to see you at NAREIT REIT week in June and we look forward to reporting back to you in August with our second quarter 2022 results. Thank you.
Yes.
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