Q2 2025 UMH Properties Inc Earnings Call
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Good morning and welcome to umh properties. Second quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on a touchtone phone to withdraw your question. Please press star then 2
please note that this event is being recorded.
It is now my pleasure to introduce your host Mr. Craig Koster Executive, Vice President and general counsel. Thank you, Mr. Koster, you may begin.
Thank you very much operator. In addition to the 10 q that we filed with the SEC yesterday we have filed an audited second quarter supplemental information presentation.
This supplemental information presentation along with our 10 Q are available on the company's website at umh.org.
We would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Insurance, that its expectations will be achieved.
The risks of uncertainties that could cause actual results to differ materially from expectations, are detailed in the company's second quarter, 2025 earnings release and filings with the Securities and Exchange Commission. A company, disclaims any obligation to update its forward-looking statements?
In addition, during today's call, we will be discussing non-gaap Financial metrics. Reconciliations of these non-gaap Financial metrics to the comparable gaap Financial metrics as well as the explanatory and cautioning language are included in our earnings release, our supplemental information, and our historical SEC filings.
Having said that I would like to introduce management with us today. Eugene Wendy, founder and chairman Samuel. Andy president and chief executive officer and a chew Executive Vice President and Chief Financial Officer, Brett Taft, Executive Vice President, and Chief Operating Officer Jim mykins vice president of capital markets. And Daniel Andy Executive, Vice President is now my pleasure to turn the call over to umh his president and chief executive officer Samuel, Andy.
Thank you very much. Craig normalized ffo for the quarter was 23 cents per share for both the second quarter of 2024 and 2025
Overall normalized ffo is up 16% or 2.6 million for the quarter and 20% or 6.4 million for the year.
Our strong financial and operating results have given management. And the board of directors, the confidence to increase our quarterly common stock dividend by 4.7% from 21.5 cents per share to 22.5 cents. Per share representing an annual dividend rate of 970 cents per share.
We have now increased our dividend for 5 consecutive years for a cumulative, annual increase of 18 cents or 25%.
Our earnings per share were impacted by the issuance of 101.4 million of new GSC debt at a 5.855% interest rate.
Subsequent to quarter end, we issued a new series B Israeli Bond at a 5.85% interest rate.
The capital race sub 6% will be deployed a creatively over time.
We have capital needs of $120 to $150 million annually, which we invest in our capital improvements, new rental homes, expansions, and financing of home sales, most of these uses being a creed of uses of capital.
Over the past 2 years, we have relied on our common ATM to fund our growth initiatives.
This year, we are utilizing our ATM less and debt more. In the long term, this debt will be repaid and the equity should increase in value.
We currently have 150 million in capital available to invest in our growth initiatives. Additionally, we are actively exploring acquisition opportunities and we believe we will find compelling deals to deploy this capital.
Grow the company and ultimately grow earnings per share and our share price.
Had an active and outstanding. Second quarter of 2025, the quarter was highlighted, by the refinancing of 10 communities for gross proceeds of 101.4 million.
These properties were appraised as part of the refinancing process.
The appraised value of the 10 communities was 164 million or 82,000 per site.
Um, is total investment in those properties to date is just 67 million meaning that in 10, out of our 144 communities, we have created 97 million in value.
The incredible takeaway from these results is that it's important as ffo and ffo per share. Results are. It's as important to be aware of the value umh adds to our investments in our communities.
Our Marcellus and Utica Shale strategy, which began in 2011 has resulted in substantial appreciation of the land communities homes and approvals we own in the area.
Data centers, the shell cracker plant pipeline projects, new gas, Wells, and electric generation, plants. All create the need for more quality affordable. Housing
Umh owns 4,000 acres of land in 78 communities, with 12,300, home sites in the Marcellus and Utica Shale areas.
Including our 3 joint venture communities containing 26,800 developed home, sites 10,600, rental homes situated on 8,200, acres of land.
The 10 billion, Homer City gas fired power plant located in, close proximity to 4. Um, communities is demonstrating proof that are strategic investments in the energy, rich Marcellus and Utica Shale regions are working.
This power plant will benefit to Pennsylvania economy and especially Western Pennsylvania, where we own 28 communities. And where we have also seen increased interest in the leasing of our oil and gas rates.
Our Nashville and southeastern United States strategy is also delivering occupancy increases, strong sales, profits and increased property values.
Are well-located communities with our strategy of creating quality affordable housing in communities of factory-built, homes for sale or rent is generating industry-leading performance.
As of July 18th, 2025 umh is total 2-year. Return was an industry-leading 17% and our 5-year-old total return was an industry-leading 76.7%.
During the second quarter, we increase total revenue from 60.3 million in the second quarter of last year. Consisting of 51.5 million, and Rental and related income, and 8.8 million in sales income to 66.6 million. In the second quarter of this year, consisting of 56.1 million in rental and related income and 10.5 million in sales income.
That represents an increase in quarterly, total income of approximately 10%.
For the 3 and 6 months ended June 30th, 2025 rental and related income increased, 9% from the prior year period and Community noi increased by 11% and 9% respectively.
During the quarter, we increase same property, occupancy by 76 units, over the first quarter, and by 251 units over last year.
Same property, rental and related income, increased by 8% and same property. Noi increased by 10% or approximately 3.1 million.
Year to date, same property, rental and related income increased by 8% and same property. Noi increased by 9% or 5.6 million.
Our same property operating expense ratio for the quarter fell to 38.2% as compared to 39.4% last year.
Our rental home occupancy was 94.4% as compared to 95% last year.
During the quarter, we converted 190 new homes from inventory to revenue. Generating rental homes, year to date, we have converted 305 new homes from inventory to revenue, generating rental homes. We currently have 450 homes on site with 145, ready for occupancy and another 300 being set up and an additional 200 homes on order that have not yet been delivered.
We anticipate by the end of 2025, we will have added 700 to 800 new rental homes.
Sales of manufactured homes continues to grow driving additional sales profits.
Growth sales for the quarter. Were a sales record at 10.5 million.
For the 3 and 6 months. Ended June 30th, 2025 sales of manufactured, homes increased by 19% and 6% respectively from the prior year period.
Games from the sales for the quarter was 1.5 million or 14% of total sales.
Gained from the sales for the 6 months, was 2.2 million or 13% compared to 1.8 million or 11% last year.
We acquired 2 New Jersey communities on March 24, 2025, consisting of 266 lots, which are 100% occupied, and subsequent to quarter end. We acquired 2 Maryland communities consisting of 191 lots, which are 79% occupied.
Year to date, we have closed on 4 communities, containing 457 sites, for a total purchase price of $39 million.
Position pipeline in short order.
we continue to invest in Greenfield development, through our joint venture with newvine, real estate,
We have made progress filling our 2 Sebring Florida communities and have recently opened our third joint. Venture Community, honey, Ridge, and Honeybrook Pennsylvania.
Honeybridge is a 113 site community that officially opened. In June sales, traffic is incredibly strong. And the homes are selling as we set them up.
We anticipate our investments in a joint venture to generate increased cash flows and improved results as we continue to fill the communities.
We invite you all to come to the Innovative housing showcase on September 6th to September 9th in Washington. DC on the National Mall, where we will be showing 3 of our homes. These homes will be a ritzcraft, multi-section home, a champion, single section home, both, homes with factory-installed GAF, solar shingles factory-installed, solar batteries, and factory-installed car chargers, and a Capco multi-section home to highlight the upcoming possibility of 2-story Hut code homes.
We are excited about Hud's, desire to solve the affordable housing crisis by breaking down, zoning, barriers, and providing incentives for more manufactured home Community Development with easier to obtain lower cost financing.
The big beautiful bill made opportunity, zones of permanent structure which could enable, um, to improve and build more communities within opportunity zones.
Umh is current opportunity Zone, fund has grown its annualized revenue. From a year ago, by more than 900,000 dollars. These results demonstrate the potential growth impact of opportunity zones.
We view our 3,100, vacant, lots and 2,300 Acres of vacant land, 349 fully entitled Lots, 4006 completed and constructed lots and 500 Lots in the approval process. As incredible opportunities to increase rental Revenue, sales revenue, finance and insurance revenue, and increase value and ffo per share.
This organic growth should allow us to generate earnings growth and improve operating results for the years to come.
Additionally with our strong balance sheet, we are prepared to execute on compelling Acquisitions as they become available.
The fundamentals of manufactured housing are strong and umh is well, positioned to grow through our established long-term business plan.
And now, I turn it over to Anna to discuss our second quarter results.
Thank you, Sam, normalized ffo, which excludes amortization and non-recurring items increased 6% from 16.8 million for the second quarter of 2024 to 19.5 million for the second quarter of 2025.
Normalize ffo per diluted, share amounted to 23 cents. For both. The second quarter of 2024 and 2025
Sequentially normalized to ffo increase 3%, or 632,000 from the first quarter of 2025.
Rental and related income for the quarter was 56.1 Million compared to 51.5% in an increase of 9%.
This increase was primarily due to an increase in same property occupancy, the addition of rental homes and increase in rental rates and the purchase of 2 communities. At the end of the first quarter of 2025,
Community operating expenses increased 7% during the quarter.
This increase was mainly due to the 2 communities. Purchased, at the end of the first quarter of 2025,
And increase in payroll costs.
Real estate taxes snow removal Water, and Sewer expenses.
Our same property results, continue to meet our expectations.
Same property income increased by 8% for the quarter while same property Community. Operating expenses only increase by 5% resulting in an increase in same property Community. Noi of 10% for the quarter from 30.9 million in 2024 to 34 million in 2025
As we turn to our capital structure at quarter end, we had approximately 659 million in debt.
28 million with loans payable.
And 101 million was at 4.72% series a bond.
Total debt was 99% fixed rate at quarter end. With a weighted average interest rate of 4.63%.
The weighted average interest rate on our mortgage debt with 4.52% at quarter end compared to 4.17% at quarter end last year.
The weighted average maturity on our mortgage debt, was 5.4 years at quarter, end and 4.8 years at quarter ends last year.
In this volatile interest rate environment, the weighted average interest rate on our short-term, borrowings with 37 basis points. Lower at 6.44% at the current quarter ends as compared to 6.81% at quarter ends last year.
In total the weighted average interest rate on our total debt was 7 basis points higher at 4.63% at the current quarter end compared to 4.56% at quarter end last year.
At quarter end umh had a total of 322 million. In Perpetual preferred Equity, our preferred stock combined with an equity market capitalization of over 1.4 billion dollars and our 659 million in debt results in total Market capital.
Utilization of approximately 2.4 billion that quarter end as compared to 2.1 billion last year. Representing an increase of 13%.
During the quarter. We issued and sold 1.8 million shares of common stock under the September 2024. Common ATM program at a weighted average price of 17.60 per share.
Generating gross proceeds of 31 million and net proceeds of 30.3 million. After offering expenses
The company also received 2.2 million, including dividends reinvested through the drip.
During the quarter, we did not issue and sell any shares of our series. D. Preferred stocks under our 2025 preferred ATM program and we currently have $100 million eligible for sale under the 2025 preferred ATM program.
Subsequent to quarter ends, we issued and sold an additional $160,000 shares of our common stock under the September 2024. Common ATM program at a weighted average price of $16.99 per share.
Generating net proceeds, after offering costs of 2.7 million.
We currently have 46.7 million of common stock remaining eligible for sale. Under the September 2024, common ATM program.
From a credit standpoint, we ended the quarter with net debt to Total market capitalization of 24.1.
Net debt. Less Securities to Total market capitalization of 22.9.
Net debt to adjusted EBITDA of 4.8 times.
And net debt less Securities to adjusted ibida of 4.5 times.
Interest coverage was 3.8 times and fixed charge coverage was 2.3 times.
During the quarter, we paid off 11 mortgage totaling 43.1 million with cash on hand.
In addition, as Sam mentioned during the quarter, we completed the addition of 10 communities to our Fannie Mae credit facility for total proceeds of 101.4 million.
This interest-only loan is at a fixed rate of 5.855% with a 10-year term.
As part of the refinancing process, a certified appraisal was conducted and concluded that these 10 communities appraised for 164 million. Whereas our total investment in these communities is 67 million demonstrating an increase in value of 97 million or 146% from our cost basis on these 10 communities.
Subsequent to quarter ends on July 22nd 2025 we sold 80.2 million of 5.85% series c, bonds, that are due in 2030.
Was 75.2 Million.
On July 8th 2025 we amended our 35 million revolving line of credit with Ocean First Bank to extend the maturity date to June 1st 2027.
Interest is at Prime with a floor of 4.75% and is secured by our eligible notes receivable.
From a liquidity standpoint. We ended the quarter with 79.2 million in cash and cash equivalents and 260 million available on our unsecured revolving. Credit facility with a potential, total of availability of up to $500 million, pursuant to an accordion feature.
We also had 194 million available on our other lines of credit for the financing of home sales and the purchase of inventory and rental homes.
Additionally, we had $30.2 million in our Reed Securities portfolio.
All of which is unencumbered.
The portfolio represents only 1.4% of our undepreciated assets.
We are committed to not increasing our investments in our security portfolio and have in fact, continued to sell certain positions.
At this time, we are not updating our full year 2025 guidance.
We are well positioned to continue to grow the company internally and externally. And now, let me turn it over to Jeanne before we open it up for questions.
Thank you, Anna.
UMH is a leader in the manufactured housing and affordable housing industry.
We believe that our years of hard work will lead to a favorable legislative changes that will allow us and the nation to increase the supply of affordable housing while generating industry-leading returns.
Our mission to provide quality affordable, housing is an important and worthwhile cause recent changes in the head code allowed duplexes triplexes quad plexus and potentially 2 story homes.
These changes greatly increase, the value of our existing Investments and have made new Investments, where land costs are higher and affordable. Housing is needed more attractive to us.
Additionally, we are proud of our partnership with GAF to install solar shingles at the factory factory production should reduce the cost of solar shingles and thereby utility costs. Further benefiting our tenants. We have seen positive proposed revisions to the opportunity Zone laws that may make raising capital for opportunity zones easier.
We are excited about the future of the industry and plan to utilize these recent developments to benefit all of our shareholders and further grow the company.
Operationally, the foundation, we have laid over the past few years has positioned the company to generate outstanding results for the foreseeable future.
Our communities continue to report, strong sales, demand growing occupancy, and more efficient operations.
We continue to develop our vacant land which over time will increase the value of our communities, and our company.
We plan to be active on the acquisition fund as compelling opportunities to become available.
Umh is poised to grow the company in our earnings because of our past achievements and the efforts of our Sensational team.
managing a large portfolio of manufactured housing communities, is not an easy task
We value all of our partners Bankers, shareholders and residents. Each of you is a critical part of our current and future success,
We will now begin the question and answer session.
to ask a question, you may press star then 1 on your touchtone phone,
If you are using a speakerphone, please pick up your handset before pressing the keys to withdraw your question. Please press star, then 2.
At this time, we will pause momentarily to assemble our roster.
And your first question today will come from guava with Alliance Global Partners. Please go ahead.
Yeah, thank you. Good morning.
Um,
I wanted to follow up on your comments. I think you said that you're not updating 2025 guidance. Uh, does that mean, you guys are the drawing the product guidance or the product guidance still holds?
Everybody understands that in manufactured housing, there's going to be BT and AT. BT stands for Before Scott Turner, and AT stands for After Scott Turner. Scott Turner and his team are working on dramatically improving the financing available to the retail customer. So, we remain incredibly optimistic about our ability to sell homes, increase gross sales, and increase profits. Based on all this, we see no reason to change our guidance at this time. Therefore, we're leaving our guidance with the statement: maybe we'll hit the low end, but nobody knows that because we've built great expansions in great locations and new communities in prime areas. And you know, 1 cent equals $840,000; we're trying to make a lot more than that. So, let's see what happens.
And and so you know what?
What are some of that I guess the the drivers of I guess, you know the change the I guess not so much confidence in the prior guidance like is is is it the the capital that that that that you guys create and timing of the deployment or or I guess anything on the rent growth side that you guys think well go slow, we are confident in the low end of the guidance. Okay, we're very confident in the low end as a Guidance. The chances are in the uh, third and fourth quarter. Uh, we'll grow earnings per share which will get us uh, to the low end of the guidance realize, uh, we're currently at 2096 cents to a dollar for. Yeah. And so, you know, based on the cool,
Literally if we just go up 1 cent per quarter for the third and fourth quarter, we're going to hit those numbers and there's a potential of going up more than that. And so, you know, it would be silly for us to change guidance when there's a potential. Uh, we could, we could actually get to the higher end because this financing of the retail customer could result in a dramatic increase in the sale of existing rental homes, which will be all cash to us. So it's too interesting. A time, uh, to reduce, or withdraw guidance.
Okay, understood and then um, maybe lastly on the price of new homes. Have you guys seen any changes on where the new homes are coming in?
Yeah, prices of new homes are about where they've been, uh, no no material changes there. And, you know, I know we hit on it uh, in our uh, uh, in our uh, earnings call script. But, uh, we do have about 200 homes on site, which are just about ready for occupancy. We continue to make progress, getting all of those homes set up. We've got another 265 homes being set up and another 169 on order again, those homes. We know what we're going to pay for them. We know exactly the rents we need to get to hit our 10% return on those rental units. And, you know, as we reported demand is incredibly strong throughout our locations. We uh filled 305 new rental homes, here to date. Um, in July, we actually can
Converted 81 new rental, homes from inventory to revenue, generating rental homes. So, that was actually the most that we've done all year. So, we're seeing a lot of positive demand. We should continue to grow rental Revenue. Uh, we're very comfortable with where our expenses are and we see our same property results. Continuing in the right direction, plus with Sam saying, on the increase in sales. So we're we're very confident operationally that we're going to get where we need to go.
Okay, thank you. That's all I have.
Your next question today will come from Rob Stevenson with Janie. Please go ahead.
Good morning guys. Um have you finalized your plans for the Conowingo Court acquisition and how many of those 142 sites are going to need to be have their homes removed in that process?
Yeah. So uh again we're we're happy to get that deal done. It was a long time coming. I think we had it under contract for a year and a half or longer. Uh, you know, we worked with the seller to complete improvements on the site and uh we we do expect to see some short-term occupancy decreases at uh koingo Court. The property is 142 units. It's currently got 101 occupied sites. Um, I don't want to go into too much detail as to what we'll be removed. But we believe given the demand we see given that, uh, the strength of the market there, that we will pretty rapidly complete the turnaround process and start to grow occupancy there. That, that should not be a
The term uh value ad plan uh you know a year or 2 years we should have that property where we want it to be.
How much do you expect to spend on the upgrades to the community infrastructure? Not the not the rental homes and stuff like that, but anything that you're planning on doing in improving the community how big of a capex spend is that likely to be
Complete some of the common areas, pave the streets. Uh, you know, the good news is the water and sewer lines have been completely upgraded, uh, by the seller before the acquisition was completed. So now we're really just working on, uh, roads, possibly some amenities, and you know, more minor items. The bulk of that was completed and included in the sales price.
Okay. And then are there other than this property? Are there? Any others where you're spending any notable dollars for repositioning other than just to add rental units?
Or is that process and the rest of the portfolio? Largely been done at this point and spent the, the capital budget for the communities, you know, to upgrade them as approximately 20 million dollars and that gets done through the course of the year. So there's still work to do. The reason we keep pointing out that the appraised value. When up so much in the refinancing is, you know, if you look at our 12-month increase in same property, operating income, uh, and you put that at a 5 cap and then you subtract the investment in the property. The the increase value to the company is $180 million or $2 per share. So people who are focusing on missing by a penny, 840,000 are missing the boat because the, you know, appreciation is and, and it's appreciation and value. Add is $2 per share, and you're going to have the same results in the kind of Wingo properties, you know, things don't happen immediately, we have to, uh, replace old homes with new, add new homes, generate sales income, but
But it's going to work out and it's going to be a great acquisition.
And just the Highlight would say, I'm talking about the capital Improvement budget that we set forth. Annually does include the other uh major Capital Improvement projects throughout the communities, that'll be water and sewer line upgrades pavings mostly in some cases adding club houses or other amenities. But that that's all detailed in the capital Improvement budget. So nothing outside of that, reposition the existing communities. Okay? But that is sort of essentially maintenance
Right? At the end of the day is is it's that those that the the repositions are when you buy an asset and then empty it or reduce the, you know, get rid of units, Etc. That's an addition to that, right? Is that, that's not part of the sort of normal Capital that you do. Well, I yeah, so the reason I don't see it that way. You know, maintenance is snow plowing fixing potholes, uh, repairs and maintenance to rental homes is so they become, uh, vacant Capital Improvements. Give us the ability to increase rents and profits. That's repaving, the streets, replacing water lines, sewer lines, changing the signage, it's it's major improvements to the property that add value. So there's a separation between the 2 and a half policy is to continually upgrade communities. Uh, we, we have a homes in there. They may last 50 years, but then we replace them with Better Homes and the exciting thing now is, we may replace them with
Well, at your homes, 2 story homes, where we have ability to really create, uh, affordable housing, but high, quality housing, and the same thing with the operation of the park. Uh, people always view that if you have 1 person in the office and a maintenance man, that's for Park. We don't mind having 2 in the office and 2 maintenance people. Our policy is the upgrade and upgrade and provide affordable housing, but high quality housing. So that we improve the image of the of the our business.
okay, let
me 1 for me.
585 that you got on the Israeli Bond deal, compared to where you could have priced the deal here in the US.
thank you, if we
Look your debt. Um, and those are for people who are like we in Israel, we obtained a. Double A minus rating from uh, S&P mlot. We wouldn't be able to do that here because here they depend a lot more on unsecured debt. And because we have F**** and Freddy um and the other and the GSC financing at pretty low rates and pretty um, nice. Um, amortization Etc, we don't want to give that up.
My my comparison was the tornado, secured debt, and our unsecured debt is at a lower rate than the Varnado secured debt.
Okay. And then I guess the follow-up there is, I think that at the end of the day, this is rarely a Bond deal. Is this basically pre-funding the call it?
70 million of mortgages that are in the 2025 maturity schedule, on the supplemental, or are you planning on doing something else with that?
We are planning on doing.
That, um, we are planning on refinancing some of the communities, not all of them, um, through the gsc's. Um, so we
Pardon me. This is the conference operator. It appears we have lost connection to our speaker line. Please stand by while we reconnect. Thank you for your patience.
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My apologies, I wasn't.
Sure where I left off.
Rob, can you hear us? We will go back to, you know, the phone cut out. So we don't know how much of our answer you heard but we can go back and repeat it if that's where we are.
Sounds like this phone's not, pardon me.
1 moment, please.
No.
Go ahead. Rob your lines. Now open
Yes, can you hear me now?
Yes, thank you.
Um, yes. I think you were saying, Anna, that you were gonna take the 70 million and do some with HUD and some other, uh, do something else with that, that as well.
Yes, what we uh, anticipate is, we anticipate refinancing the other not all of the other communities but only some of the other communities. So we anticipate another um, 70 million, I believe in total um between HUD or a really Fannie Mae and uh and an additional bank. So what will happen is we will have probably about 3 additional communities, that will become free and clear.
Okay, that's helpful. Thank you. Alright. And as I said in anyone given year, we need about 120 to 150 million dollars in New Capital. Um, so in addition to any Acquisitions that come about, so we wanted to make sure that we had enough dry powder to take advantage of those Acquisitions. We see that it is opening up. We see some communities coming for sale, so we wanted to make sure we are able to take that Advantage. Okay. I guess as a follow-up to that is there anything that you guys have under contract at this point or think that is likely to be, uh, closed in the next, you know, 6 to 12 months here.
Of the contract.
We have we're working on a few deals. Uh, we don't have anything under contract at the moment. We do anticipate putting a few properties under contract in the coming months. Um,
Is possible that some clothes before the end of the year. But, you know, given that they're not actually under contract right now, it's uncertain. Um,
we are pretty happy with some of the deals we're seeing on the acquisition front. So I would expect us to grow the pipeline shortly. Uh, but again, given that nothing's under contract? I I would want to guarantee anything. Correct it. It's important to notice, we, you know, refer to all the time, it's in our presentation. Uh, we need capital for the additional rental units. We need capital for the uh Capital Improvement. Sales are accelerating and we use our own money to finance those sales. So, you need money for
And then you take it to the number of lots, we refer to that, we're constructing and that causes approximately a hundred thousand dollars for lot. And then you look at how many Lots we have in the approval process. So there's a lot of Need for Capital and a common criticism was, we were using the ATM at a low stock price. We were using the preferred at a high interest rate and now, we shifted gears and went to debt at a very favorable, interest rate. So, I think we should be a very favorable development.
Okay. Thanks guys. I appreciate the time this morning.
Thank you.
And your next question today will come from Craig couter with B Riley FBR. Please go ahead.
Actually, where the Lucid Capital markets. Um, but thank you. Uh, you know, you guys did a really good job of keeping a lid on same store operating expenses this quarter. Uh, can you talk about the outlook for the back half of 2025?
Quarter, which we're very happy about, uh, for the year. Uh, same property operator or operating expenses are 41% same property, uh, for as compared to last year at 41.9%. So a nice decrease their, we also, you know, as we had indicated, it was a really rough winter and we had a lot of elevated snow removal costs. Um, we anticipate same property expenses to be in a similar range to where they were, which was growth of 4.7% over last year. Uh, they may increase a little bit, but you know, as we've told everybody throughout the year, we expect our same property expense, expense growth in the 5 to 7% range. Um, you know, certain areas we're looking at bringing on additional maintenance staff and, you know, things like that. Um, but again, we do anticipate an acceleration and occupancy growth, that would expect our rental and related income to grow more than the 7.8%. So, even if operating expenses, pick up a little bit, we anticipate, uh, Community noi being in that, you know, High single digit low, double digit range,
Got it. That's helpful. Um, changing gears Sam and your commentary. Uh, you mentioned that, uh, you might be looking at doing, maybe closer to 700 to 800 home deployments this year. I think, you know, earlier in the year, you think you, you were pretty confident, you hit 800 are, are you seeing any supply chain disruptions from the manufacturer or, uh, is it just really things are just going a little bit slower than initially expected?
No, I I don't think anything's going slower. The only the only thing possibly going slower. You know setup. Crews are a little bit of an issue, but we can get through that.
And uh, uh, again we, you know, we remain confident, you know? We we, we want to be conservative, 700 800 units. Um, again, I I would focus on the announcements coming from HUD pertaining to their exchange policies, as to, you know, know, uh, frames on the houses which will allow you to go to 2, story heading significant value to many, lots and programs. They are working on today to result in people being able to buy their existing home for just 3% down with low interest rates, so it's it's not finalized yet. But, you know, as I've always told you
2001 was a major blow to manufactured housing, when we lost the secularization of manufactured home loans. It got far worse in 2009, when the uh, ability to pay laws kicked in Industry, shipments fell to 40,000, uh, you know, Scott Turner. The HUD secretary is working on reversing all of these things, improving the retail financing improving people's ability to get new communities approved. So we remain very optimistic, especially about our ability to sell existing rentals at a cash profit because these new loans will generate cash. Yeah, and Sam we should cover those tax on tips. No tax on tips.
Is is huge. So you have to understand that you know, 30% of your income is what qualifies you for the loan. So the new rule 25,000 in income can be tipped income that you're not taxed on.
So you pay 5 to taxes but anyhow, you pay no other taxes.
So 25,000 income on a 6% amortization. 25 years is a hundred thousand dollars. So, right now with a letter from the employer, the restaurant Etc, saying this person is earning 25,000 tips. We think we will soon be able to qualify them.
For a 100,000 more in buying power they have and if it's not 100% and it's not 25,000 and 12,500 then they're going to qualify for 50,000. So this is absolutely the hugest development which is why I keep harping on it and why it would be silly to change guidance based on 840 thousand dollars
I got you. Um,
Changing gears. I'd like to talk about your interest income. Um, there was a sequential decline from the last couple of quarters is that just a function of some movement in your cash balance on hand throughout the quarter or or have any adjustments, been made to rates at umh Finance
Absolutely. What we've been doing is we raised the cash and then we put it into money markets. Um, but again, when we use, then we use the cash. But also, rates have come down a little bit.
Okay, that's helpful. Um,
I guess finally, how you mentioned sales were accelerating. Um, you know, how are they trending here in the third quarter? Is it, you know, a similar increase relative to the second quarter, or maybe even better?
Actually have over 5 million dollars in our sales pipeline right now which is an outstanding number and I'm not quite sure I've seen it that high before. So that's very positive. We're also working through some older homes that some of our New Jersey properties. As people move out, we're able to recoup those lots and put new homes on there and generate sales profits and recess those rents to Market. Um,
and we, uh, are very happy with the progress we've made at our cinnamon Woods expansion. We've got some expansions coming online in Tennessee. And, uh, you know, we're really optimistic about the future of sales. Um, you know, just pivoting back to the question about rental homes. Briefly, I mentioned it earlier, but I want to mention it again in July. We converted 82, homes and inventory to new rental homes, which was the most we have done all year. If you go back a few years, when we did 1100 rental homes, we were hitting 80 or 90 homes a month. So it's really nice to get back to that. 80 number with the homes, we have being set up in the right locations in the demand. We think we can continue that. So we're we're hopeful that we get up to the 800 number but you know, we put the range at 7800 I I just want to repeat this again. We own 10,600 rental units. We bought the first rental units in 2011 at forty thousand dollars a piece based on people's current rent to sales price of those homes is going to exceed 60,000 dollars on the
The oldest homes and and and these new policies and and there's a couple of them. Number 1, we've got the, uh, licensed mortgage loan, Originators to agree that your monthly payment, what you're paying for housing. If you're in a thousand dollar a month apartment, and you're moving to a 000 per month manufactured, housing that carries more weight than that, that to income or percentage of income. So, that's huge. That's a huge new development in the last quarter. And then we just talked about how uh, no tax and tip is going to increase their income. How I I didn't talk about yet, how we could credit their existing down payment, on the rental, to, to down payment, you know, their existing security deposit on a rental to down payment on a sale. So, all of these, you know, and I don't know exactly how quickly with our lender, we can, you know, when I say our lender, with our mortgage loan, originator how quickly we can Implement these new policies we're working on it. But as soon as those get in,
Implemented. As I see it, I'd be shocked if you don't sell a 100 rental within 6 months at 70,000 a piece. So 7 million in new sales with the sales profit.
Okay. Great. Appreciate the color, thanks.
And your next question today will come from John masoka with B Riley. Please go ahead.
Good morning.
Um,
Can we going back to the guidance again? I know we touched on it a bunch but it seems like, based on some of your earlier, commentary, that maybe the ability to hit that guidance range is contingent on. Kind of
Ramping up, um, sales of homes is that fair on my end? And I guess what kind of gives you what kind of level of sales, would you need to see to make
Guidance achievable.
Well, I want to back up just based on increased rental income, right. I think it's very realistic to expect a quarter for the fourth quarter. That's just based on increase in rent loans. Then throw in the potential for increased in sales income.
And I get everything right.
I mean, there's there's a lot of variables there. There's, there's the home sales, there's the speed with which we complete expansions financing costs and Acquisitions. So, Sam Sam talked about the, um, confidence in hitting the lower end of the range, but to your your questions. Um, yeah. All of those things and, and, and others are going to, um, impact whether or not we can't hit the higher end.
Okay, so it sounds like maybe the lower end of the range is kind of achievable through kind of just run rate business. And then if you accelerate
sales and obviously the the direct flow through in terms of net profit, that comes from that,
You could reach towards the higher end of the range. Is that kind of a fair way of characterizing. It it's a fair way of characterizing it and as we all know we're making forward looking statements we could be wrong. There could be a major recession interest rates could rise but assuming things go as we see them at this moment. I think that's a very realistic statement.
With that in mind, I guess, um, kind of your your your net income from selling homes, even though you had a record kind of Topline quarter was down a little bit. Was that resulted was that the result of anything that was kind of? Maybe I, sorry timing wise as you build that inventory, or I just kind of what was kind of driving, maybe the margin
Homes versus kind of what the cost was for selling them, you know, margin. Kind of compressed a little bit, but I was wondering if that was driven by something that was climbing wise or if there was something else going on there.
On on all expansions and new construction. When you get to the last phase, if you earn the biggest profits and you have to jump start these things a bit. So the first phase may have lower markers. You know. That's exactly right. Um, last year it was a 38%. Um gross margin this year. It went down to 32% historically, by the way, we're very happy with 32%. So, um, you know the, the sales results to us are fine but yet that cinnamon was and some other expansions we opened, you know, we were selling at a 20% margin which was reducing that uh overall margin down to 32%. But you know as we pointed out at the growth in the top line was there and if we get further into these expansion, we do expect that growth margin to increase back hopefully into that 38% range. But time will come,
Okay. And is that just kind of like you know to borrow a terminology from like the multi family and hotel space like a hedge and bed strategy where you want to get people. You know, the initial space you kind of have to offer a bit of a discount but as the community fills up your
You're able to be a little bit more aggressive on pricing.
Absolutely 100%. People are fearful when you first open; they don't know what's going to happen. You have to establish that, you know, you're going to fill this place. Home values are consistent or going up. And then our history and our experience is that the last phase sells out quickly at the highest prices.
And then, I mean, kind of bigger picture, you've mentioned how to bunch on the call. I guess the positive catalysts are expecting to see there should that flow through in the 2025 results. I mean, it seems like by the time, you know, government.
It gets active on things and that close to the consumer. It might be more of a 2026 kind of Tailwind, but just this kind of curious. Why? Why the confidence that can be? So immediately impactful.
These things have already begun, and the Innovative Housing Conference is in early September. So I suspect you're going to see results.
you know, by by the end of September and uh,
you know, you know we're we're
We're the greatest form of quality, affordable housing with communities for sale or rent. We have a HUD Secretary that recognizes that we have both parties in the Senate and the Congress who recognize that.
Uh, we think that the atmosphere at this moment is better than it's been since the 1990s. So, we're very optimistic.
Okay. Uh, that's it for me. Thank you very much.
To conclude our question and answer session, I would like to turn the conference back over to Samuel Landy for any closing remarks.
Thank you, operator. I would like to thank the participants on this call for the continued support and interest in our company. As always Jean, 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, 2025 results. Thank you.
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