Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- UMH Properties Inc (UMH, Financial) reported a 10% year-over-year increase in normalized FFO per share for the second quarter of 2024, from $0.21 to $0.23.
- The company announced a 4.9% increase in its quarterly common stock dividend, raising it to $0.215 per share.
- UMH experienced strong demand for home sales and rentals, with overall occupancy increasing by 64 units to 87% during the quarter.
- Rental and related income for the quarter increased by 9% compared to the previous year, driven by higher rental rates and occupancy.
- UMH has a strong balance sheet with net debt to total market capitalization of less than 30%, positioning it well for future investments and growth opportunities.
Negative Points
- Community operating expenses increased by 8% during the quarter, primarily due to higher payroll costs, real estate taxes, and rental home expenses.
- The weighted average interest rate on mortgage debt increased from 3.88% last year to 4.17% this year, impacting financing costs.
- UMH's expansion sites are not yet fully occupied and accretive to earnings, indicating a delay in realizing potential revenue from these investments.
- The company faces challenges in monetizing vacant land, requiring government approvals for joint ventures and development projects.
- UMH's guidance for the remainder of 2024 includes significant capital needs of $110 million to $120 million, which may require additional equity or debt financing.
Q & A Highlights
Q: Can you provide a rough range of how much refinancing will contribute to the $110 million to $120 million capital needs for this year?
A: Samuel Landy, President and CEO, stated that they expect approximately 50% debt to equity in their internal expansion plans. Anna Chew, CFO, added that there will be no refinancing of mortgages in 2024; it will start in 2025, with an expected refinancing of approximately $117 million.
Q: How do the sales of older homes impact your rental portfolio?
A: Brett Taft, COO, explained that they are continuously adding rental homes while selling older ones. The net increase in rental homes was 111, factoring in the sales of older homes. Demand remains strong, and they expect this trend to continue.
Q: What does the guidance assume in terms of home sales and profit margins going forward?
A: Jim Lykins, VP of Capital Markets, mentioned that they have not disclosed specific assumptions regarding home sales and profit margins in their guidance but may consider doing so in the future.
Q: Can you discuss the same-store NOI growth trajectory expected for the second half of 2024?
A: Brett Taft, COO, indicated that they expect similar results to the first half, with rental and related income increases in line and high single-digit to low double-digit same-property NOI growth.
Q: How are interest rates affecting the acquisition market and financing for tenants?
A: Samuel Landy, CEO, noted that higher interest rates might lead to more sellers and fewer buyers, which could benefit UMH. They offer financing at rates similar to conventional mortgages, and higher rates increase the affordability gap, making their homes more attractive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
