Executive Summary / Key Takeaways

• UMH Properties, Inc. is executing a long-term value creation strategy centered on affordable manufactured housing, driving consistent growth in occupancy, sales, and net operating income. The company's normalized FFO reached $0.25 per diluted share in Q3 2025, annualizing to $1.00, aligning with the midpoint of its 2025 guidance range of $0.96 to $1.04 per diluted share.
• A key differentiator is UMH's commitment to technological innovation, particularly with factory-installed solar shingles and the development of duplex manufactured homes. These initiatives aim to significantly reduce resident costs and increase housing density, enhancing affordability and expanding the customer base.
• The company's robust organic growth pipeline includes 3,500 vacant sites and 2,400 acres of vacant land, alongside a target of adding 700 to 800 new rental homes in 2025. These investments, totaling over $100 million at any given time, are expected to drive future earnings and property appreciation.
• UMH maintains a strong balance sheet and disciplined capital allocation, shifting towards greater debt utilization at favorable rates (e.g., 5.85% Series B Israeli bonds) to fund accretive growth initiatives, while also exploring strategic acquisitions and joint ventures.
• Favorable industry tailwinds, including a national housing shortage, increasing demand for affordable options, and potential legislative support from HUD for improved retail financing, position UMH for sustained long-term growth and value appreciation.

The Foundation of Affordable Living: UMH's Strategic Blueprint

UMH Properties, Inc., established in 1968, operates as a self-administered, self-managed real estate investment trust (REIT) with a foundational focus on owning and operating manufactured home communities. The company's core business involves leasing manufactured home sites and company-owned homes, complemented by an integrated sales operation designed to boost community occupancy. This long-standing strategy has positioned UMH as a significant player in the affordable housing sector, a market increasingly vital amidst a persistent national housing shortage.

The company's historical journey underscores its adaptive and growth-oriented approach. A pivotal moment arrived around 2011 with the initiation of the Marcellus and Utica Shale strategy, targeting energy-rich regions. This foresight has led to substantial asset appreciation, with UMH now holding 4,000 acres across 78 communities in these areas, benefiting from demand spurred by data centers, pipeline projects, and power plants. Concurrently, UMH pioneered its rental home program, steadily expanding its portfolio to 10,800 rental homes by the third quarter of 2025, a critical component in addressing site vacancies and diversifying revenue streams.

UMH's strategic positioning is further enhanced by its distinct cost advantage in providing affordable housing. Manufactured homes, offering three bedrooms, two baths, and 1,100 square feet, can be produced for approximately $250,000 per unit. This contrasts sharply with conventional construction, which typically runs $400,000 to $450,000 per unit, and apartments, often smaller at 650 square feet with one bathroom, costing around $350,000 per unit. This inherent affordability is a powerful competitive moat, driving increased demand for UMH's offerings.

Technological Edge and Innovation

UMH is not merely a landlord; it is an innovator in the manufactured housing space, leveraging technology to enhance affordability and expand its market. Two key areas of technological differentiation stand out: solar shingles and duplex manufactured homes.

The company's partnership with GAF to pilot factory-installed solar shingles represents a significant leap. Unlike traditional solar panels that require field installation and drilling, these shingles are integrated during the manufacturing process. This approach dramatically reduces costs, with factory installation coming in at under $15,000, compared to over $25,000 for a field installation. The efficiency is also remarkable, with an entire roof able to be installed in less than 45 minutes. The primary benefit for residents is a reduction in utility costs, directly increasing the affordability of their housing. For investors, this innovation expands UMH's customer base, particularly among cost-sensitive demographics, and strengthens its competitive position by offering a unique, value-added feature. The long-term vision includes factory-installed batteries and car chargers, further reducing residents' fuel costs and creating a comprehensive, sustainable living solution.

Furthermore, UMH is championing duplex manufactured homes, a response to recent changes in HUD code that allow for increased density through duplexes, triplexes, quadplexes, and potentially two-story homes. This innovation allows UMH to generate significantly higher returns per lot. A single lot with a duplex can generate $1,500 to $1,600 per month from two 500-550 square foot units, compared to approximately $1,000 per month for a single unit. The cost efficiency is compelling, with a manufactured duplex unit costing substantially less than a comparable apartment. This strategy is crucial for providing affordable housing in more expensive markets, maximizing land utilization, and boosting UMH's overall profitability and market reach.

Financial Performance and Operational Momentum

UMH's strategic initiatives are translating into solid financial performance and operational momentum. For the third quarter of 2025, the company reported normalized Funds from Operations (FFO) of $0.25 per diluted share, marking a 4% increase over the same period last year. This performance annualizes to $1.00 per share, aligning with the midpoint of the company's 2025 normalized FFO guidance of $0.96 to $1.04 per diluted share. Total income for the quarter reached $66.9 million, a 10% increase year-over-year, with year-to-date total income at $194.8 million, up 9%. The company is on track to surpass $250 million in total income for 2025.

The core rental and related income segment continues to be a strong driver, increasing 11% to $57.8 million for the third quarter of 2025. This growth is primarily attributable to strategic acquisitions, consistent increases in rental rates, and improved same-property occupancy. Community Net Operating Income (NOI) also saw an 11% increase to $32.8 million for the quarter. Notably, same-property NOI surged by 12% in Q3 2025, driven by a 110 basis point increase in occupancy to 88.5% and a 5.2% increase in rental rates. Operational efficiencies are evident as the same-property operating expense ratio for Q3 2025 fell to 39.7% from 41.1% in the prior year.

The manufactured home sales and finance segment also contributes meaningfully. Sales of manufactured homes increased 5% to $9.1 million in Q3 2025, with an average sales price rising to $91,000. The gross profit percentage on sales for the quarter was 37%. The company's notes receivable from previous home sales stood at $97.6 million as of September 30, 2025, generating interest income at a weighted average rate of 7.1%. Interest income overall increased significantly (30% for Q3, 37% for 9M) due to higher excess cash balances and the growing notes receivable portfolio.

UMH's balance sheet reflects a disciplined approach to growth. Total investment property expanded by 7%, or $117.5 million, during the first nine months of 2025, fueled by the addition of 433 net rental homes and the acquisition of four communities. Land development costs saw a substantial 125% increase, or $42.5 million, indicating a ramp-up in expansion projects. The company maintains a conservative financial profile, with net debt to total market capitalization at 28.3% and net debt less securities to total market capitalization at 26.9% as of September 30, 2025.

Capital Allocation and Liquidity

UMH's capital allocation strategy is designed to fuel its long-term growth initiatives. The company's annual capital needs range from $120 million to $150 million, allocated to capital improvements, new rental homes, expansions, and financing home sales, with most uses being accretive. In a strategic shift, UMH has increasingly utilized debt over its common At-The-Market (ATM) equity program, aiming to grow earnings per share and ultimately its stock price. This is exemplified by the issuance of $80.2 million of 5.85% Series B Israeli bonds due 2030, with net proceeds of $75.1 million, intended for accretive deployment.

Liquidity remains robust, with $34.1 million in cash and cash equivalents, $31.7 million in marketable securities, and $260 million available on its unsecured revolving credit facility (with an accordion feature allowing up to $500 million total availability) as of September 30, 2025. An additional $128.1 million is available on other lines of credit for home sales financing and inventory purchases. The company's weighted average interest rate on total debt was 4.8% in Q3 2025, up from 4.4% in Q3 2024, reflecting the current interest rate environment and recent debt issuances. UMH has proactively managed its debt maturities, paying off $61 million in mortgages in Q3 2025 and planning refinancings in Q4 2025, anticipating proceeds to exceed current balances.

Competitive Landscape and Strategic Positioning

UMH operates within the highly competitive residential REIT sector, primarily against larger manufactured housing REITs like Equity LifeStyle Properties (ELS) and Sun Communities (SUI), as well as single-family rental REITs such as American Homes 4 Rent (AMH) and Invitation Homes (INVH). While ELS and SUI benefit from greater scale and broader national footprints, UMH carves out its niche through regional expertise and a focused value-add strategy.

UMH's core competitive advantage lies in its ability to provide significantly more affordable housing solutions. Its manufactured homes are substantially cheaper than conventional alternatives, a critical factor in today's housing market. This cost advantage, combined with its established community network in key regions like New Jersey, New York, Ohio, and Pennsylvania, fosters stronger customer loyalty and potentially higher occupancy rates. The company's technological innovations, such as factory-installed solar shingles and duplex homes, further differentiate its offerings by directly addressing resident affordability and maximizing land utilization, areas where larger competitors may lag in direct application within manufactured housing.

However, UMH's smaller scale compared to ELS and SUI can lead to qualitatively higher operating costs and potentially slower market share capture in rapidly expanding regions. Its regional concentration, while a strength, also presents a vulnerability to localized economic downturns. Against single-family rental REITs like AMH and INVH, UMH's community-based model offers a different value proposition, potentially fostering stronger resident amenities and community building, though it may lag in technology-driven property management efficiencies.

UMH's strategy of acquiring communities that are under-occupied or require substantial capital investment (value-add acquisitions) allows it to unlock significant upside. For instance, the recent acquisition of a Georgia community for $2.6 million, with only 32% occupancy, presents a clear opportunity for substantial value creation through UMH's proven business plan. This contrasts with competitors who might focus on more stabilized, higher-priced assets.

Outlook and Risks

UMH's outlook for 2025 remains positive, with normalized FFO guidance set at $0.96 to $1.04 per diluted share. This confidence is rooted in several key assumptions: continued 5% annual rent increases across the portfolio, the addition of 700 to 800 new rental homes, and a substantial increase in sales revenue and profit. The company has $36 million in inventory ready to be sold or rented, poised to boost earnings as sites are filled. Management believes that the significant value appreciation in its properties, evidenced by refinancing appraisals, often overshadows short-term FFO fluctuations.

A major catalyst for accelerated growth could come from potential legislative changes from HUD, particularly concerning improved retail financing for manufactured homes. Policies such as recognizing tip income for loan qualification, crediting security deposits towards down payments, and giving more weight to monthly payment history could dramatically increase home sales and convert renters to homeowners.

Despite the optimistic outlook, UMH faces several risks. The availability of suitable acquisition properties that meet its investment criteria and financing remains crucial, with no guarantee that all opportunities will materialize. Competition in its operating markets is significant. While early indications suggest minimal impact from tariffs, potential supply chain disruptions for manufactured homes or a shortage of setup crews could slow down rental home deployments. The macro-economic environment, including sustained high interest rates, could also impact consumer demand and financing costs.

Conclusion

UMH Properties, Inc. stands as a compelling investment thesis, deeply rooted in its long-term commitment to providing quality, affordable manufactured housing. The company's consistent operational execution, evidenced by double-digit NOI growth and rising occupancy, is a testament to its proven business model. Strategic investments in organic growth, including a robust pipeline of vacant sites and new rental homes, coupled with innovative technological differentiators like factory-installed solar shingles and duplex homes, position UMH to capitalize on the enduring national housing shortage.

With a disciplined capital allocation strategy, a strong balance sheet, and the potential for significant tailwinds from supportive legislative changes, UMH is poised for continued earnings growth and substantial value appreciation. The company's ability to deliver affordable solutions, enhance resident value through technology, and strategically expand its footprint against a backdrop of increasing demand underscores its potential for sustained outperformance in the residential REIT sector. Investors should recognize UMH's foundational strengths and its clear roadmap for compounding value, extending beyond immediate FFO figures to encompass the long-term appreciation of its irreplaceable asset base.