UMH Properties, Inc. (NYSE:UMH) is a real estate investment trust (REIT) that specializes in the ownership and operation of manufactured home communities. With a history spanning over 56 years, the company has established itself as a leading player in the manufactured housing industry, providing affordable housing solutions to residents across the Eastern United States.
Business Overview and History
UMH Properties was incorporated in 1968 in the state of New Jersey and elected REIT status effective January 1, 1992, becoming one of the first publicly traded REITs focused on the manufactured housing sector. In 2003, the company changed its state of incorporation from New Jersey to Maryland. The company's primary business involves the ownership and operation of 139 manufactured home communities, 137 of which it owns either a 100% or majority interest in. These communities are located across 12 states, primarily in the Northeast, Midwest, and Southeast regions, and contain a total of approximately 26,300 developed homesites.
In addition to the core community ownership and management business, UMH also operates a wholly-owned subsidiary, UMH Sales and Finance, Inc. (SF), which sells and finances the sale of manufactured homes to residents and prospective residents of the company's communities, as well as for placement on customers' privately-owned land. This integrated business model allows UMH to generate revenue from both rental income and home sales, positioning the company as a comprehensive provider of affordable housing solutions.
Over the past decade, UMH has aggressively expanded its portfolio, more than quadrupling the number of developed homesites since 2010 through the acquisition of 107 communities containing approximately 18,800 homesites. This growth strategy has been a key driver of the company's success, as it has leveraged its expertise to build long-term capital appreciation.
During the 2008-2009 financial crisis, UMH faced challenges such as higher repossession rates and defaults on its customer financing program. However, the company successfully navigated through this difficult period, maintaining occupancy levels and continuing to grow its portfolio of communities.
In 2016, UMH established a third-party lending program with Triad Financial Services to finance home sales to residents and prospective residents of its communities. This program has allowed UMH to enhance the value of its communities by filling vacant sites. Additionally, in 2022, the company formed an opportunity zone fund to acquire, develop, and redevelop manufactured housing communities located in qualified opportunity zones.
Financial Performance and Metrics
UMH's financial performance has been consistently strong, with the company reporting steady growth in key metrics over the past several years. In 2024, the company reported total income of $240.6 million, representing a 9% increase compared to the prior year. This was driven by a 9% rise in rental and related income, which reached $207 million in 2024.
The company's net income attributable to common shareholders amounted to $2.5 million, or $0.03 per diluted share, in 2024, compared to a loss of $8.7 million, or $0.15 per diluted share, in 2023. Normalized funds from operations (FFO), a key metric for REITs, grew by 8% to $0.93 per diluted share in 2024, up from $0.86 per diluted share in the prior year.
For the fourth quarter of 2024, UMH reported revenue of $61.9 million, representing a year-over-year growth of 8.6%. The company's net income for the quarter was $28,000. Normalized FFO for Q4 2024 was $0.24 per share, compared to $0.23 per share in the prior year, representing a 4% increase.
Financials
UMH's balance sheet remains strong, with $99.7 million in cash and cash equivalents and $260 million available on its unsecured revolving credit facility as of December 31, 2024. The company's net debt to total market capitalization ratio stood at 20.8% at the end of 2024, down from 31.3% in the prior year, reflecting its prudent capital management practices.
Key financial metrics for the most recent fiscal year (2024) include: - Revenue: $240.55 million - Net Income: $21.64 million - Operating Cash Flow: $81.60 million - Free Cash Flow: $81.60 million
Liquidity
The company's strong liquidity position, with nearly $100 million in cash and $260 million available on its credit facility, provides UMH with ample resources to fund its growth initiatives and navigate potential market uncertainties. Additional liquidity metrics include:
- Debt/Equity Ratio: 0.67 - Current Ratio: 11.19 - Quick Ratio: 9.68
Business Segments
UMH operates through two main business segments:
1. Rental Operations Segment: This is UMH's core business, involving the leasing of manufactured home sites to residents on an annual or month-to-month basis. As of December 31, 2024, the company had approximately 10,300 company-owned rental homes situated on its homesites. In 2024, rental and related income increased 9% to $207 million, driven by increases in rental rates, same property occupancy, and additional rental homes. Community net operating income (NOI) grew 10% to $119.7 million. The company has consistently increased rental rates by 5-6% annually while maintaining strong occupancy levels, which were 87.3% as of the end of 2024.
2. Manufactured Home Sales Segment: Through UMH Sales and Finance, Inc., the company sells and finances the sale of manufactured homes. In 2024, sales of manufactured homes increased 8% to $33.5 million, with the total number of homes sold rising 16% to 394. The gross profit percentage for the home sales operations was 35% in 2024, up from 32% in the prior year.
Growth Initiatives and Expansion
UMH's growth strategy is centered around the acquisition of well-located manufactured home communities in its target markets, as well as the expansion and redevelopment of its existing properties. In 2024, the company completed 190 expansions, adding additional homesites to its portfolio. Looking ahead, UMH expects to obtain approvals for 500 or more new sites in 2025 and build 300 to 400 of those sites.
The company has also been actively involved in developing new communities through its joint venture with Nuveen Real Estate. In 2023, the partners formed a new joint venture entity to focus on the development of a 113-site community in Honey Brook, Pennsylvania, which is expected to open in the second quarter of 2025.
Additionally, UMH has established an opportunity zone fund, the UMH OZ Fund, to acquire, develop, and redevelop manufactured housing communities located in designated opportunity zones. This strategic initiative allows the company to leverage tax incentives to invest in economically distressed areas and further expand its affordable housing portfolio.
Challenges and Risks
Like any real estate investment trust, UMH faces various risks and challenges that could impact its operations and financial performance. These include:
1. Macroeconomic conditions: Adverse changes in general economic conditions, such as a recession or rising interest rates, could negatively affect demand for manufactured homes and rental rates in the company's communities.
2. Competition: UMH competes with other manufactured home community owners and operators, as well as alternative forms of housing, such as apartments and single-family homes.
3. Regulatory environment: The company's operations are subject to various laws and regulations, including those related to rent control, environmental compliance, and fair housing, which could increase operating costs or limit the company's ability to raise rents.
4. Supply chain disruptions: Disruptions in the supply of manufactured homes or other materials used in the company's operations could impact its ability to grow and maintain occupancy levels.
5. Cybersecurity threats: As with any technology-dependent business, UMH is exposed to the risk of cyber attacks, which could disrupt operations and compromise sensitive data.
Despite these challenges, UMH has demonstrated its ability to navigate market conditions and deliver consistent growth, thanks to its diversified business model, strong balance sheet, and experienced management team.
Industry Trends
The manufactured housing industry has experienced steady demand for affordable housing, with a compound annual growth rate (CAGR) of approximately 5-7% over the past five years. This trend aligns well with UMH's focus on providing cost-effective living solutions and positions the company to benefit from the ongoing need for affordable housing options across its target markets.
Outlook and Conclusion
Looking ahead, UMH remains optimistic about its future prospects. The company has introduced 2025 normalized FFO guidance in the range of $0.96 to $1.04 per share, with a midpoint of $1.00 per share. This guidance reflects the company's confidence in its ability to continue executing its value-add strategy and capitalize on the growing demand for affordable housing.
Management expects continued occupancy growth and further 5% rent increases across the portfolio in 2025. UMH anticipates adding 800 or more rental homes to its portfolio in 2025. The company has four communities under contract totaling 457 sites, with an average purchase price of $85,000 per site and a blended cap rate of approximately 5.5%.
UMH's long-term track record of success, its integrated business model, and its focus on expansion and redevelopment make it a compelling investment opportunity in the manufactured housing REIT space. As the nation grapples with a shortage of affordable housing, UMH is well-positioned to play a leading role in providing high-quality, cost-effective living solutions for residents across its markets.