UMH Properties(UMH) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The financial statements detail the company's financial position as of June 30, 2022, showing increased assets and liabilities, and a net loss primarily due to fair value changes in marketable securities Consolidated Balance Sheets Total assets increased to $1.42 billion while liabilities rose to $901.4 million due to bond issuance and preferred stock reclassification, decreasing equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $1,423,265 | $1,270,820 | +$152,445 | | Net Investment Property and Equipment | $933,734 | $913,455 | +$20,279 | | Cash and Cash Equivalents | $275,807 | $116,175 | +$159,632 | | Marketable Securities at Fair Value | $46,932 | $113,748 | -$66,816 | | Total Liabilities | $901,370 | $528,680 | +$372,690 | | Mortgages Payable, net | $468,811 | $452,567 | +$16,244 | | Series A Bonds, net | $98,811 | $0 | +$98,811 | | Series C Preferred Stock Called for Redemption | $247,100 | $0 | +$247,100 | | Total Shareholders' Equity | $521,895 | $742,140 | -$220,245 | Consolidated Statements of Income (Loss) The company reported a net loss of $6.7 million for Q2 2022 and $3.4 million for H1 2022, primarily due to a significant decrease in marketable securities' fair value Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Income | $49,223 | $48,959 | $95,091 | $92,091 | | Rental and Related Income | $42,229 | $39,341 | $83,806 | $78,054 | | Sales of Manufactured Homes | $6,994 | $9,618 | $11,285 | $14,037 | | (Decrease) Increase in Fair Value of Marketable Securities | ($10,044) | $9,291 | ($41,794) | $19,510 | | Gain (Loss) on Sales of Marketable Securities, net | $0 | $436 | $30,721 | ($294) | | Net Income (Loss) | ($6,688) | $16,003 | ($3,413) | $29,881 | | Net Income (Loss) Attributable to Common Shareholders | ($22,478) | $8,403 | ($26,803) | $15,242 | | Net Income (Loss) Per Share – Basic and Diluted | ($0.41) | $0.18 | ($0.50) | $0.34 | Consolidated Statements of Shareholders' Equity Shareholders' equity decreased to $521.9 million, primarily due to the reclassification of $247.1 million Series C Preferred Stock to liabilities - The number of common shares outstanding increased from 51.7 million at year-end 2021 to 54.7 million at June 30, 2022, primarily through ATM offerings, the Dividend Reinvestment Plan (DRIP), and stock option exercises[17] - All 9.9 million shares of 6.75% Series C Preferred Stock, valued at $247.1 million, were called for redemption and reclassified from equity to a liability on the balance sheet. An $8.2 million charge related to original issuance costs was recognized[17][20][75] Consolidated Statements of Cash Flows Net cash from operations decreased to $5.4 million, while investing activities provided $0.9 million and financing activities provided $153.7 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $5,415 | $33,203 | | Net Cash Provided by (Used in) Investing Activities | $871 | ($49,573) | | Net Cash Provided by Financing Activities | $153,701 | $90,036 | | Net Increase in Cash | $159,987 | $73,666 | Notes To Consolidated Financial Statements Notes detail acquisitions, a $30.7 million MREIC merger gain, $102.7 million bond issuance, ATM capital raising, and the $249.6 million Series C Preferred Stock redemption - The company operates as a REIT and owned 130 manufactured home communities with approximately 24,400 developed homesites as of June 30, 2022[24] Acquisitions during the Six Months Ended June 30, 2022 (in thousands) | Assets Acquired | At Acquisition Date | | :--- | :--- | | Land | $3,431 | | Depreciable Property | $13,875 | | Total Assets Acquired | $17,306 | - In February 2022, the company received $55.7 million from the all-cash merger of Monmouth Real Estate Investment Corporation (MREIC), resulting in a realized gain of approximately $30.7 million[53] - The company issued $102.7 million of 4.72% Series A Bonds due 2027 in an offering to investors in Israel, receiving net proceeds of $98.7 million[61] - All 9.9 million outstanding shares of 6.75% Series C Preferred Stock were redeemed on July 26, 2022, for a total payment of $249.6 million[97] - Subsequent to quarter end, on July 14, 2022, the company acquired Hidden Creek in Michigan for approximately $21.1 million[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 7% increase in rental income, a 20% decrease in home sales, and strategic capital raising including $102.7 million in bonds and $58.2 million from ATM programs Overview and Business Strategy UMH operates 130 manufactured home communities, focusing on acquisitions, improvements, and adding rental homes to drive occupancy and operating results - As of June 30, 2022, the company owned and operated 130 manufactured home communities with approximately 24,400 developed homesites across ten states[104] - The company's business plan focuses on acquiring communities, making physical improvements, and adding rental homes to vacant sites to increase occupancy and improve operating results[108] - The company added 151 rental homes in the first six months of 2022, bringing the total to approximately 8,900. The plan is to add 700-800 rental homes in total for 2022[110] Supplemental Measures (Non-GAAP) Non-GAAP measures show Community NOI increased 7% to $46.8 million, while Normalized FFO decreased to $17.7 million due to higher expenses Community NOI (in thousands) | Period | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $23,306 | $22,296 | +4.5% | | Six Months Ended June 30 | $46,812 | $43,872 | +6.7% | FFO and Normalized FFO (in thousands) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | FFO Attributable to Common Shareholders | ($320) | $9,855 | $8,224 | $18,236 | | Normalized FFO Attributable to Common Shareholders | $8,695 | $10,281 | $17,670 | $18,982 | Changes In Results Of Operations Rental income grew 7% to $83.8 million, while home sales decreased 20%; results were impacted by a $41.8 million unrealized loss on securities - Rental and related income increased by 7% for both the three and six months ended June 30, 2022, primarily due to acquisitions and rental rate increases of 3% to 4%[122] - Sales of manufactured homes decreased 20% from $14.0 million (193 homes) in H1 2021 to $11.3 million (147 homes) in H1 2022[125] - For H1 2022, the company recognized a $30.7 million gain on sales of marketable securities (from the MREIC merger) and a $41.8 million decrease in the fair value of its remaining securities[133] - Interest expense increased 22% in H1 2022 compared to H1 2021, mainly due to interest on the newly issued Series A Bonds[134] Liquidity and Capital Resources The company strengthened liquidity by issuing $102.7 million in Series A Bonds and raising $58.2 million via ATM programs, enabling the $249.6 million Series C Preferred Stock redemption - In H1 2022, the company sold 2.4 million shares of common stock through its ATM programs, generating net proceeds of $58.2 million[144] - The company issued $102.7 million of 4.72% Series A Bonds due 2027, receiving net proceeds of $98.7 million[145] - As of June 30, 2022, liquidity sources included $275.8 million in cash, $46.9 million in marketable securities, and availability on various credit facilities[147] - On July 26, 2022, the company redeemed all 9.9 million shares of its 6.75% Series C Preferred Stock for a total payment of $249.6 million[148] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to quantitative and qualitative disclosures about market risk have occurred since the prior fiscal year-end - There have been no material changes regarding quantitative and qualitative disclosures about market risk since the end of the previous fiscal year[160] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the reporting period[161] - No material changes were made to the company's internal control over financial reporting during the second quarter of 2022[162] PART II - OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings were reported during the period - There are no legal proceedings to report[164] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the last annual report - No material changes to the company's risk factors have occurred since the last annual report[165] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported - None reported[166] Item 6. Exhibits Exhibits include CEO and CFO certifications and financial data formatted in iXBRL as required by the SEC - Exhibits filed include certifications from the CEO and CFO pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002[173] - The report includes financial statements and notes formatted in iXBRL[173]