According to the Seeking Alpha financial news website, is the following information about “UMH Properties Q3 2022 Earnings Preview.” Further below is information was obtained from UMH Properties, which is there “UMH Investor Presentation – October 2022.” That UMH investor pitch is packed with insights that arguably the vast majority of investors, and even numbers of manufactured home professionals, may overlook. The Manufactured Housing Institute (MHI) award winning UMH investor pitch is arguably an example of the truth hiding in plain sight, as the fact check, analysis and expert commentary by MHProNews herein will reveal.
Nov. 07, 2022 5:35 PM ET UMH Properties, Inc. (UMH)By: Mary Christine Joy, SA News Editor1 Comment
UMH Properties (NYSE:UMH) is scheduled to announce Q3 earnings results on Tuesday, November 8th, after market close.
The consensus FFO Estimate is $0.23 and the consensus Revenue Estimate is $50.22M
Over the last 2 years, UMH has beaten FFO estimates 38% of the time and revenue estimates 50% of the time.
Inflation is specifically listed by Cavco Industries as a factor that their management admits can negatively impact their operation’s performance and profitability.
By comparison to Cavco’s 10Q remarks to investors about the risks from inflation to their operation, the word “inflation” is only mentioned once in the UMH investor pitch. It is as a footnote, as shown below. So, by simply comparing cautionary notes to investors from one publicly traded company with another, a potentially significant warning emerges that Cavco sounded but UMH apparently did not.
 Assumes 5% annual construction cost inflation
[2} Assumes 95% occupancy and 3% annual rent growth
Note that UMH’s footnote #2 above projects 3 percent annual rent growth is not a rate that would keep up with the current rates of inflation. 3% rent growth was okay in January 2020, when the rate of inflation was about half of UMH’s 3 percent annual increase plan. But by September 2020, that same plan means there is about a 5.2 percent loss in earnings if “rent growth” is kept at 3%. The flip side, of course, is that renters of a UMH rental property would likely value the more modest rate of increase. For renters, the UMH 3 percent rent growth plan is good news.
That issue of rent growth vs. the inflation rate is one that MHProNews highlighted earlier this year as being overlooked in reports on the manufactured home community sector. See that still relevant report and analysis linked below.
While there is a generic disclosure among the forward-looking statements segment of their investment pitch about regulatory risks, the reality is that the Consumer Financial Protection Bureau (CFPB) announced earlier this year (2022) that they are probing the manufactured home community segment of the manufactured home industry. That probe could be due in part to complaints and concerns stirred up by the residents and customers of other Manufactured Housing Institute (MHI) member firms that have been reported by MHProNews/MHLivingNews and numbers of reports in mainstream media.
Those briefly outlined factors above don’t mean that manufactured home community (MHC) operations aren’t profitable. It is apparent from the UMH and other publicly traded firm disclosures that manufactured home communities, and MHC REITs (Real Estate Investment Trusts), routinely make money.
But inflation related factors ought to imply that UMH management (along with others in the REIT and manufactured home community investment arena) should press for public policies that aim to bring inflation-causing federal borrowing under control. Additionally, UMH leaders arguably ought to be pressing public officials to end carbon-energy punishing policies under control. Why? Because in the absence of such a press for more consumer and business friendly public policies, investor yields will suffer. Evidence of that is found below. Consider UMH’s own information from their investor pitch deck in the page shown. Then look at the UMH 1-year performance trend. As Joe Biden might say if he was involved in manufactured housing, think of a 3-letter word that begins with the letter O.Ouch.
This need to press for a change in domestic energy policies under Biden and the contemporary Democratic Party may be especially true for UMH. The reason? UMH indicates as much by labeling their “exposure” in the Marcellus and Utica shale regions. That noted, for balance and in fairness, lower rents than conventional housing ought to keep the demand for their rental units higher than more costly alternatives offered by conventional housing competitors.
With those initial areas of concern noted, per UMH, are the following statements and related MHProNews analysis.
UMH Properties, Inc. (“UMH” or “the Company”) is a publicly owned Real Estate Investment Trust (“REIT”) operating since 1968 and as a public company since 1985.
Leading owner and operator of manufactured home communities – leasing manufactured home sites to private residential homeowners
Robust portfolio of 132 manufactured home communities containing approximately 25,000 developed home sites, an increase of 5 communities totaling approximately 900 sites from a year ago, located across NJ, NY, OH, PA, TN, IN, MI, MD, AL, and SC.
Expanding rental portfolio of approximately 8,900 units, an increase of 253 in the last 12 months; anticipating an additional 700-800 homes per year
Well positioned for growth with 3,600 existing vacant lots to fill, and nearly 1,900 vacant acres on which to build approximately 7,600 future lots
Transformative joint venture with Nuveen Real Estate allowing UMH to pursue accretive development deals while reducing the need for capital”
Manufactured Home Sales Rates Analysis
UMH reported there were 324 manufactured homes sold. They have per this report 132 manufactured home communities. While in fairness the math may be skewed a bit based on when a community came into the UMH portfolio, the basic math for manufactured homes sold looks like this: 324/132 = or some 2.45 HUD Code manufactured homes sold per year per communities.
Given the affordable housing crisis, and high demand for lower cost housing, that sales rate per location of a mere 2.45 manufactured homes sold annually appears to be extraordinarily low.
Additionally, as is noted under the UMH presentation page posted above, the company appears to be hundreds of units behind their own annual goal on adding rental units. While there are a range of factors that may account for that low level of new rental units being added to the UMH portfolio, one possibility is the long-lead times that numbers of manufacturers have reported in the post-COVID19 pandemic announcement affordable housing demand. That noted, there are plenty of questions to be asked – and hopefully honestly answered – about the proper deployment of capital and planning found among the manufactured home industry’s top producers.
UMH is correct in pointing out the favorable demographic trends in terms of how that should benefit manufactured homes. That noted, it is like one finger pointing to an opportunity while three fingers are pointing back at them with the kinds of concerns noted above. Given trends that ought to benefit manufactured housing, the lack of manufactured home sales by UMH is rather stark.
UMH President and CEO Sam Landy appears to have the qualities needed that would allow him to break away from the problematic association of his firm with other MHI members (see examples herein) that often have so-called ‘predatory’ tactics. UMH, for example, was not targeted by HBO’s Last Week Tonight with John Oliver’s satirical slam errantly dubbed “Mobile Homes.” That noted, Landy may not be willing to resist the occasion ‘award’ from an association that is marked by problematic players.
Amidst these troubling examples of their fellow “proud members” of MHI, UMH has the potential to revitalize the essentially dormant efforts of NAMHCO. Alternatively, UMH’s leadership could be part of an effort to forge a new post-production trade group that is more white hat member and behavior focused instead of the all too often gray-to-black hat behavior apparent from so many top MHI brands (see linked examples herein).
The evidence-based case can be made that CEO Landy during the Preserving Access period of MHI’s history was better grounded in what was necessary for the industry, and thus his firm, to advance. Again, insiders at UMH have told MHProNews that a segment of voices inside that company have been working from within to repositioning the company – for want of a better term – into a more ESG and ‘woke’ mindset. The drive for rentals vs. a mindset geared more toward learning the art of volume sales to spur more manufactured home ownership in their portfolio are part of that group’s thinking.
There is much more to be unpacked from the UMH presentation, some of which has been covered previously by MHProNews. The latest UMH pitch-deck is found at this link here. A bold new strategy at UMH could make them a true white hat leader in the MHC segment of the industry. Will they respond to that opportunity to become more profitable and more respected apart from MHI than within it?
There are no indications that such is the case at UMH, but then, hope springs eternal. Watch for follow up reports on UMH Properties and other publicly traded brands, all too many of which are “proud members” of the problematic MHI.