Executive Summary / Key Takeaways

• Core Investment Thesis: UMH Properties is a compelling long-term investment, uniquely positioned to capitalize on the severe national affordable housing shortage through its hybrid model of manufactured home communities for sale and rent, robust organic growth pipeline, and innovative technological differentiators.
• Strong Operational Performance: The company delivered solid Q2 2025 results, with a 10% increase in total income, 11% growth in Community NOI, and a record $10.5 million in manufactured home sales, demonstrating effective execution of its value-add strategy.
• Strategic Growth Drivers: UMH's substantial land bank (2,200-2,400 acres) and vacant sites (3,100-3,400) provide a multi-year runway for organic growth, complemented by targeted acquisitions and greenfield developments like the Honey Ridge joint venture.
• Technological & Regulatory Tailwinds: Pioneering factory-installed solar shingles and duplex manufactured homes, alongside anticipated favorable HUD policy changes for financing and zoning, are set to enhance affordability, expand the customer base, and unlock significant value.
• Disciplined Capital Management: A strong balance sheet, conservative leverage (Net Debt/Adj EBITDA 4.8x), and diversified capital sources, including favorable GSE debt and Israeli bonds, enable UMH to fund its $120-$150 million annual growth initiatives and opportunistic acquisitions.

The Enduring Appeal of Affordable Housing and UMH's Strategic Foundation

UMH Properties, Inc. stands as a seasoned player in the real estate investment trust (REIT) sector, organized in 1968 and specializing in the ownership and operation of manufactured home communities. This core business places UMH squarely at the forefront of addressing a critical national need: affordable housing. The United States currently faces a deficit of 4 million homes, with only 1.3 million built in the past year, creating an intensifying demand for cost-effective living solutions. This structural imbalance, exacerbated by high mortgage rates and a scarcity of traditional housing inventory, has made renting a more attractive option, with the cost of buying versus renting reaching its most extreme point since 1996.

UMH's journey reflects a strategic evolution to meet these market dynamics. Initially focused on lot rentals, a pivotal shift in 2011 saw the company begin acquiring and renting out manufactured homes, opening its communities to a broader demographic. This adaptation was crucial in overcoming industry headwinds, including the loss of manufactured home loan securitization in 2001 and the onset of restrictive "ability-to-pay" laws in 2009. Concurrently, UMH initiated its Marcellus and Utica Shale strategy, investing in energy-rich regions where it now owns 4,000 acres across 78 communities, benefiting from substantial land appreciation and a growing demand for affordable housing driven by industrial developments like the $10 billion Homer City gas-fired power plant.

In a sector dominated by larger, more diversified residential REITs like Equity Lifestyle Properties (ELS) and Sun Communities (SUI), UMH carves out a distinct niche. While ELS and SUI boast broader geographic footprints and often more amenity-rich, lifestyle-oriented communities, UMH differentiates itself through a concentrated focus on affordability and a deep regional expertise, particularly in the Midwest and Northeast. This allows UMH to foster strong local market knowledge and customer relationships, potentially leading to more stable occupancy rates and a resilient revenue base. UMH's value-add strategy, centered on improving older communities and developing expansions, further distinguishes its approach from competitors, many of whom prioritize rapid acquisitions or upscale urban developments.

Technological Edge and Innovation: Redefining Affordable Living

UMH's competitive moat is significantly strengthened by its commitment to technological differentiation and innovation within the manufactured housing sector. At its core, the "technology" of factory-built homes provides an inherent cost advantage over traditional construction, a benefit UMH consistently leverages.

The company is actively pioneering advanced solutions to enhance affordability and appeal. A notable initiative is its partnership with GAF to pilot solar homes featuring factory-installed solar shingles. This approach offers significant advantages over traditional field installation: the cost of a solar roof is reduced from over $25,000 for field installation to under $15,000 when integrated at the factory. Furthermore, factory installation dramatically cuts down installation time, with an entire roof capable of being completed in under 45 minutes. These solar shingles are initially owned by a third-party, meaning UMH incurs no direct cost for their installation on rental units. The primary benefit is a reduction in tenants' utility bills, which directly enhances the affordability of UMH's housing, broadens its customer base, and strengthens demand. The long-term vision includes factory-installed solar batteries and car chargers, allowing residents to charge electric vehicles at a lower fuel cost, further solidifying the value proposition.

Beyond energy solutions, UMH is at the forefront of new housing formats. The company has championed duplex manufactured homes, a design that allows for increased density and provides affordable housing solutions in more expensive markets. By creating two smaller units on a single lot, duplexes can significantly boost the return per lot. UMH is also exploring the possibility of two-story HUD code homes, which, if approved, would further increase density and value on existing land. These innovations are not merely incremental improvements; they are strategic moves that directly address the housing crisis by making quality housing more accessible and efficient to deploy. For investors, these technological advancements translate into a stronger competitive position, enhanced financial performance through lower operating costs and higher potential returns per site, and a clear roadmap for long-term growth in a high-demand sector.

Operational Excellence and Value Creation: Beyond the Income Statement

UMH's operational strategy is a testament to its long-term, value-add business plan, which consistently generates returns that extend beyond immediate FFO figures. The company's hybrid model, encompassing site leases, home rentals, and home sales, is executed across its portfolio of 144 communities, comprising approximately 26,800 developed homesites.

Rental operations remain a bedrock of UMH's performance. The company owns approximately 10,600 rental homes, achieving a robust 94.4% occupancy rate as of June 30, 2025. In the first half of 2025, UMH added a net of 237 rental homes, with a target of 700 to 800 new rental homes for the full year. This growth is supported by efficient operations, with annual repairs and maintenance expenses averaging approximately $400 per home. Management anticipates continued strong same-property operating results, with rental and related income growth exceeding 8% and community NOI growth in the high single-digit to low double-digit range for the remainder of 2025.

The sales division, operated through UMH Sales and Finance, Inc., plays a crucial role in filling vacant sites and generating profits. Q2 2025 saw record gross sales of manufactured homes at $10.5 million, contributing $1.5 million in gains from sales operations (14% of total sales). Year-to-date, gains from sales reached $2.2 million, up from $1.8 million in the prior year. While the gross profit percentage on sales saw a temporary dip to 32% in Q2 2025 from 38% in Q2 2024, this was attributed to initial sales in new expansions where homes were strategically priced lower to "jump-start" occupancy. As these expansions mature, margins are expected to improve. The average sales price for homes in Q2 2025 was $103,000, up from $84,000 in Q2 2024, reflecting a shift towards higher-end offerings.

UMH's value-add strategy is further evidenced by its consistent asset appreciation. Refinancing processes have repeatedly demonstrated that the company's properties double in value over approximately 10 years from the initial investment. A prime example is the Q2 2025 refinancing of 10 communities, which were appraised at $164 million against UMH's total investment of $67 million, showcasing $97 million in created value. This long-term approach means UMH typically has over $100 million invested in projects not yet yielding accretive returns, such as its extensive organic growth pipeline. This pipeline includes 3,100 to 3,400 vacant sites and 2,200 to 2,400 acres of vacant land, with plans to approve over 500 new sites and build 300 to 400 sites in 2025. These initiatives, including the recently opened Honey Ridge joint venture community in Pennsylvania, are designed to drive sustained earnings growth and enhance the company's long-term asset value.

Financial Health and Capital Strategy: Fueling Sustainable Growth

UMH's financial performance in Q2 2025 underscores its operational effectiveness and disciplined capital management. Normalized FFO for the quarter remained stable year-over-year at $0.23 per share, representing a 3% sequential increase from Q1 2025. Total income for Q2 2025 rose by 10% year-over-year to $66.6 million, driven by a 9% increase in rental and related income to $56.1 million. Community Net Operating Income (NOI) saw an impressive 11% increase to $33.1 million, while same-property NOI grew by 10% year-over-year, propelled by an 80 basis point increase in occupancy and a 4.2% rise in rental rates. Interest income also saw significant growth, increasing by 37% due to a larger average balance of notes receivable ($92.3 million) and a higher weighted average interest rate of 7.1%.

The company maintains a robust balance sheet and ample liquidity to support its growth initiatives. As of June 30, 2025, UMH held $79.2 million in cash and cash equivalents, complemented by $260 million available on its unsecured revolving credit facility (with an accordion feature allowing for up to $500 million). An additional $194 million is available through other lines of credit for home sales financing and inventory purchases. The company’s REIT securities portfolio, valued at $30.2 million, remains unencumbered and is not targeted for expansion.

UMH's capital strategy is designed to fund its annual capital needs of $120 million to $150 million for capital improvements, new rental homes, expansions, and home sales financing. The company has strategically shifted its funding approach, relying more on debt and less on its common At-The-Market (ATM) program. This was evident in Q2 2025 with the addition of 10 communities to its Fannie Mae credit facility, securing $101.4 million at a fixed rate of 5.855% for a 10-year term. Subsequent to quarter-end, UMH successfully issued $80.2 million of 5.85% Series B Bonds due 2030 in Israel, yielding net proceeds of $75.2 million. This access to favorable, long-term debt financing, particularly through government-sponsored entities (GSEs) and international markets, provides a significant competitive advantage, as highlighted by management, who noted that such rates are often lower than those available to other REIT sectors in the U.S.

The company's leverage metrics reflect a conservative financial posture, with net debt to total market capitalization at 24.1% and net debt to adjusted EBITDA at 4.8x as of Q2 2025. Interest coverage stood at 3.8x and fixed charge coverage at 2.3x, indicating a strong capacity to service its debt obligations. This financial strength and flexibility position UMH to continue its dividend growth, having increased its common stock dividend for five consecutive years, now at an annual rate of $0.90 per share.

Competitive Landscape: A Differentiated Approach in a Coveted Sector

UMH operates within a highly competitive yet fundamentally attractive sector, positioning itself with a differentiated strategy against both direct and indirect rivals. Its primary direct competitors include other publicly traded manufactured housing REITs such as Equity Lifestyle Properties and Sun Communities, as well as broader residential REITs like AvalonBay Communities (AVB) and UDR, Inc. (UDR).

Against ELS and SUI, UMH's core competitive advantage lies in its deep regional expertise and a value-add model focused on enhancing existing communities and developing organic growth opportunities. While ELS and SUI often pursue aggressive acquisition strategies for scale and diversification, UMH's rising stock price has lowered its equity cost of capital, narrowing the historical advantage held by these larger players. UMH's ability to secure favorable debt financing through GSEs and international bond markets further enhances its competitive position, allowing it to acquire and develop properties at attractive yields. Management notes a trend of less competition for property acquisitions, which, combined with UMH's capital access, creates a favorable environment for opportunistic growth.

Compared to multi-family operators like AVB and UDR, UMH's focus on manufactured housing offers a distinct value proposition rooted in affordability. This allows UMH to serve a different, often underserved, demographic, providing a buffer against economic downturns that might impact higher-end urban markets. UMH's technological innovations, such as factory-installed solar shingles and duplex manufactured homes, further differentiate its product offering, enhancing affordability and density in ways that traditional multi-family housing cannot easily replicate.

Indirect competition comes from alternative housing solutions and emerging technologies. However, UMH's integrated approach, combining land ownership, community management, home sales, and rentals, provides a comprehensive solution that is difficult for fragmented players to match. The company's strategic positioning is also bolstered by significant barriers to entry in the manufactured housing sector, including high capital requirements and complex zoning regulations, which protect its existing portfolio and development pipeline.

Outlook and Risks: Capitalizing on Growth and External Headwinds

UMH's outlook for 2025 remains robust, with management expressing confidence in achieving its normalized FFO guidance of $0.96 to $1.04 per diluted share. This confidence is rooted in several key growth drivers. The company anticipates continued occupancy gains, driven by strong demand for affordable housing and the planned addition of 700 to 800 new rental homes. Annual rent increases of approximately 5% across the portfolio are also expected to contribute significantly to revenue growth. Accelerated home sales, particularly from new high-end expansions and with the potential for favorable HUD policy changes (e.g., allowing tip income for loan qualification, crediting security deposits as down payments), represent a significant upside.

The acquisition pipeline is expanding, with four communities (457 sites) currently under contract for $39.1 million, expected to close in the first half of 2025. These include age-restricted communities in New Jersey and value-add properties in Maryland, which offer immediate occupancy and long-term appreciation potential. The company's Opportunity Zone Fund, which has already grown its annualized revenue by over $900,000 in the last year, stands to benefit from proposed legislative revisions that could ease capital raising for such investments. Furthermore, the preliminary joint venture agreement for luxury home development on 131 acres in Vineland, New Jersey, while a long-term play (returns expected in 3+ years), represents substantial future value creation.

Despite this optimistic outlook, UMH faces pertinent risks. Macroeconomic downturns or sustained high interest rates could impact debt costs, refinancing terms, and consumer demand. While early indications suggest tariffs will have a minimal impact, management is closely monitoring potential supply chain disruptions and price increases from manufacturers. Operational challenges, such as securing adequate setup crews for new homes, also pose a potential constraint on the pace of rental home conversions. However, UMH's proactive approach to pre-ordering homes and its strong balance sheet mitigate some of these risks, positioning the company to capitalize on the enduring demand for quality affordable housing.

Conclusion

UMH Properties, Inc. presents a compelling investment narrative, deeply rooted in its strategic response to the nation's persistent affordable housing crisis. By skillfully blending a robust rental program with a growing sales division, UMH has cultivated a resilient business model that consistently generates operational improvements and long-term asset appreciation. The company's commitment to innovation, exemplified by its pioneering work in solar shingles and duplex manufactured homes, not only enhances affordability but also fortifies its competitive standing in a sector ripe for disruption.

With a substantial organic growth pipeline, disciplined capital allocation, and a strong balance sheet, UMH is well-equipped to execute its value-add strategy and capitalize on an expanding acquisition landscape. The confluence of favorable macroeconomic tailwinds, potential supportive regulatory changes from HUD, and UMH's proven ability to create significant value beyond reported FFO, positions the company for sustained earnings and dividend growth. For discerning investors, UMH offers a unique opportunity to participate in a socially impactful business that is building enduring value in a critical and underserved market.