- UMH Properties Inc. (UMH) beat estimates in Q4, leading to a positive outlook for 2021.
- Internal and External growth look to add significant value in the upcoming year.
- Revenue, NOI, FFO, occupancy, and operating expenses remained strong for Q4 and FY 2020, leading to higher expectations in 2021.
As earnings season begins to wrap up, many companies have estimates and guidance in place for the upcoming quarters and fiscal years. Cyclical sectors such as energy, financials, and real estate have been outperforming in today’s market and it looks as if value stocks are starting to make a comeback, debunking the myth that “value is dead”. One REIT that could be classified as growth and/or value is UMH Properties (UMH), a manufactured housing REIT that owns and operates properties across the United States. Our managing director at SWC, Dean Myerow, published an article last year (LINK) covering the company and highlighting its upside potential. The company recently released its 4th quarter earnings the results helped support SWC’s bullish view on the company’s stock. Below are some highlights of UMH’s recent earnings release:
- Q4 FFO of $0.20, beats by $0.02.
- Revenue of $42.83M, beats by $0.08M.
- Increased same-property NOI by 15%.
- Increased same-property occupancy from 84% to 87%.
- Increased rental and related income by 11%.
- Increased community NOI by 20%.
- Increased normalized FFO by 16% and normalized FFO per share by 11%.
- Improved operating expense ratio by 390 basis points to 44.1%
The demand growth for the company’s properties is reflected through the increasing occupancy, revenue, NOI, and FFO. During the year, the company increased its rental home portfolio by 858 homes to about 8300 total rental homes, representing an increase of 12%. In addition, the company acquired two communities containing about 310 homesites, raised over $63 million in preferred stock, (through at-the-market sale programs), and raised its dividend by 5.5% to an annualized rate of $0.76 per share. The company also remains optimistic about its internal growth moving forward:
“So same store 2021, we feel very good about our prospects. By putting in 800 to 900 rental homes and achieving our 4% rent increases, we think that we can grow revenue similarly which was 8.4% in 2020. Now, expenses will increase a little bit this year, as things return to normal, there will be some travel expenses, some legal expenses, but generally, we should be able to keep that under or at 5%, which should result in low double digit, same store NOI growth.”
- Brett Taft, UMH COO, UMH Properties Q4 Earnings Call
However, there are also interesting plans in place for external growth as well.
“So, UMH has discovered why the apartment business has always been successful. There are always people who need affordable rental housing. And UMH has found that existing manufactured home communities in good location, adding rental units is the best way to provide the most affordable housing there is. And we are adding about 800 rentals for about every 100 new homes we sell. There are still customers for new home sales, the 55 and older people who are staying long term. And those opportunities for sales are growing because incomes are rising. The baby booms aging. So we expect sales to increase. We expect the owners of homes in communities to increase but we see ourselves right now like a franchise, Home Depot, Walmart, McDonald's, Burger King, we have a formula that works. And so now our issue in front of us is how do we go out and open as many new stores as possible profitably, and it's far more difficult to get approvals and build Greenfield new rental home manufactured home communities, that's far more difficult than buying existing communities who have deferred maintenance and did not shift over to the rental home model.”
"So as good as our internal growth would be, I think it's time to become even more excited about our external growth opportunities, because we've gained significant confidence in that business plan. We've moved to new states in the past year and we're going to continue to move to new states in the future. So it's all a very exciting time for UMH.”
- Sam Landy, UMH CEO, UMH Properties Q4 Earnings Call
Overall, UMH properties’ recent earnings call has given investors many things to be excited about in the future. The company’s current financial position, growing demand for its properties, and internal and external growth put UMH in a great position to succeed in 2021. SWC remains bullish on UMH and is excited for what is to come for the company in the upcoming fiscal year.
Analyst's Disclosure: I am/we are long UMH.
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