UMH Properties, Inc.
Q4 2016 Earnings Call Transcript

Published: 9 Mar 2017

[Operator:]

Good morning and welcome to UMH Properties Fourth Quarter and Year-End 2016 Earnings Conference Call. All participants will be in a listen-only-mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. It is now my pleasure to introduce your host, Ms. Nelli Madden, Director of Investor Relations. Thank you. Ms. Madden, you may begin.

[Nelli Madden:]

Thank you very much operator. In addition to the 10-K that we filed with the SEC yesterday, we have filed an unaudited annual and fourth quarter supplemental information presentation. This supplemental information presentation along with our 10-K are available on the Company’s website at umh.reit. I would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can provide no assurance that its expectations will be achieved. The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the Company’s annual 2016 earnings release and filings with the Securities and Exchange Commission. The Company disclaims any obligation to update its forward-looking statements. Having said that, I would like to introduce management with us today, Eugene Landy, Chairman; Samuel Landy, President and Chief Executive Officer; and Anna Chew, Vice President and Chief Financial Officer. It is now my pleasure to turn the call over to UMH’s President and Chief Executive Officer, Samuel Landy.

[Samuel Landy:]

Thank you very much Nelli. Good morning, everyone, and thank you for joining us. We are pleased to report our results for the fourth quarter and year ended December 31, 2016. UMH was one of the top performing REITs in 2016 with a total shareholder return of 59%. It was an excellent year for UMH, highlighted by our normalized FFO per share growth of 20%. This marks our fourth consecutive year of double-digit earnings per share growth. For the fourth quarter, our normalized FFO was $0.18 per diluted share fully covering our $0.18 per share quarterly dividend. UMH is continued to opportunistically acquire value-add communities. In 2016, we purchased a total of three communities containing approximately 300 developed homesites situated on 219 acres for an aggregate cost of approximately $7.3 million. Subsequent to year-end, we completed the acquisition of an additional five communities containing approximately 1,300 developed homesites situated on 382 acres for an aggregate purchase price of approximately $36.5 million. Our portfolio is now comprised of 106 communities with 19,300 developed homesites located throughout seven states. We will continue to focus on acquiring communities with significant upside potential and leverage our expertise to build long-term value for shareholders. Our product is workforce housing, the return of manufacturing jobs to the areas where we operate as well as increased our occupancy in income. Our results are directly tied to the fortunes of the economies in these areas. Our communities in the energy rich Marcellus and Utica Shale regions are poised for additional growth given the new administration's pro-domestic energy initiatives. Additionally, technological advances have reduced the cost of drilling. Oil and gas companies in the Marcellus and Utica Shale regions are again profitable. We are seeing interest for new oil and gas leases. New drilling will spur the continued growth in the local economies. Lower energy prices reduce the cost of manufacturing in the northeast and we directly benefit as new jobs are created in our regions. UMH recognized that vacant lots have significant value when the economy surrounding those vacancies improves. Our 1,000 square foot, three bedroom, two bath homes are readily accepted as workforce housing at returns that have made UMH one of the best performing REITs in 2016. Our 3,500 vacant sites provide us with opportunity to continue to rapidly improve our results for the next several years. I will now focus on our performance for the full-year and then Anna will drill down further on our fourth quarter results. Our metrics across the Board continue to improve. In 2016, community net operating income increased by 27.4% and our operating expense ratio has continued to improve from 49.6% in 2015 to 47% in 2016. Our same-property results have also strengthened substantially increasing the value of our communities. Same-property occupancy increased from 82.9% at year-end 2015 to 84.8% at year-end 2016 representing a gain of 190 basis points. Year-over-year same-property revenue increased 12.9% while expenses only increased 6.1% resulting in an increase in the same-property NOI of 18.9%. Our strong same-property operating results continue to validate our business plan of acquiring communities in strong geographic locations below replacement costs, making necessary improvements and growing occupancy and revenue by utilizing our rental home and sales programs. Our rental home program continues to be the primary driver of our occupancy and revenue growth. It is the most efficient way to increase our occupancy thereby increasing the value of our communities which can then be realized through refinancing. During 2016, we installed and rented approximately 900 homes. At year-end, our rental home portfolio consisted of approximately 4,700 homes representing 26% of our total homesites. The demand for our rental homes continues to be strong demonstrated by a rental home occupancy of 91.5%. This demand is driven by the need for affordable workforce housing in our geographic areas. In 2016, national home prices increased 5.8%. Upward pressure on existing home price is due to tight supply, rising mortgage rates, and stringent mortgage requirements have steered housing demand to renting. These factors will propel demand to our sector since we can provide quality housing at the lowest cost in any given market. Our sales of manufactured homes have not yet returned to pre-recession levels, although this year we increased home sales by approximately 26% from $6.8 million in gross sales in 2015 to $8.5 million in 2016. This volume is still not enough for our sales operation to be profitable. At some point, our potential home buyers will find their ability to access financing improve, when this happens, our sales will increase. Further, the 55 and older buyer, who depends on being able to sell their existing single family home and using the equity for their purchase of a manufactured home has been sidelined while waiting for the value of their existing home to increase. We are encouraged to see conventional home prices finally rising to pre-recession levels. We are working hard to once again make home sales on major source of income at UMH and we believe that it will return to its full potential as a major profit center as our nation's economy continues to improve and at lending standards return to normal. And now, Anna will provide you with greater detail on our results for the quarter.

[Anna Chew:]

Thank you, Sam. Core Funds from Operations or Core FFO was $5.7 million or $0.20 per diluted share for the fourth quarter of 2016 compared to $3.9 million or $0.14 per diluted share for the prior year period, representing an increase of 43% on a per share basis. Normalized FFO, which excludes realized gains or the sale of securities and other non-recurring items, was $5.3 million or $0.18 per diluted share for the fourth quarter of 2016, compared to $3.8 million or $0.14 per diluted share for the prior year period, representing an increase of 29% on a per share basis. For the full-year 2016, Core FFO was $20.7 million or $0.74 per diluted share compared to $14.3 million or $0.55 per diluted share for 2015. Normalized FFO was $18.4 million or $0.66 per diluted share for 2016, compared to $14.2 million or $0.55 per diluted share for 2015, representing a 20% increase on a per share basis. Rental and related income for the quarter was $23.4 million compared to $20.6 million a year ago, representing an increase of 13%, primarily due to community acquisitions, the addition of rental homes and the growth and occupancy. Community NOI increased by 17% for the quarter from $10.9 million in 2015 to $12.7 million in 2016. This is the 10th consecutive quarter that we have delivered double-digit year-over-year NOI growth. Community operating expenses for the quarter were 45.6% of rental and related income, representing a 170 basis point improvement over the 47.3% expense ratio for the prior year period. As Sam mentioned, for the year, our expense ratio was 47%, compared to 49.6% for 2015. As we noted in the past, most of the community expenses consist of fixed cost and therefore as occupancy rates continues to increase and as we upgrade and integrate our acquisitions, these expense ratios will continue to improve. Our lease securities portfolio continued to deliver strong results increasing from $75 million at year-end 2015 to $109 million at year-end 2016 representing 13% of our growth asset value at year-end with an unrealized gains of $16.7 million. Our securities portfolio generated $6.6 million in dividend income and $2.3 million in net realized gains during the year. As we turn to our capital structure, at year-end we had approximately $351 million in debt of which $293 million was community level mortgage debt at a weighted-average interest rate of 4.4% and $58 million were loans payable and a weighted-average interest rate of 3.1%, 85% of our total debt is fixed rate. During the year, we have financed, refinanced four communities for a total of $32 million reducing our overall weighted-average interest rates on our mortgage debt from 4.6% to 4.4%. We are currently in the process of renewing our unsecured credit facility, which is set to mature later this year. In keeping with our growth strategy, this year show us closing in on a $1 billion total enterprise value. During the year, we issued 2 million shares of our 8% Series B cumulative redeemable preferred stock resulting in $49 million in net proceeds. This combined with our additional Series B preferred shares and our Series A preferred shares resulted in a total of approximately $187 million in perpetual preferred equity at year-end. Out total preferred stock combined with an equity market capitalization of $442 million and our $351 million in debt results in a total market capitalization of approximately $980 million at year-end, representing a 30% increase year-over-year. From a credit standpoint, our net debt to total market capitalization was 35%. Our net debt for securities to total market capitalization was 24%. Our fixed charge coverage was 1.7 times. Our net debt to EBITDA was 6.9 times, and our net debt for securities to EBITDA was 4.7 times. From a liquidity standpoint, we ended the year with $4 million in cash and cash equivalents, $109 million in our securities portfolio, encumbered by $23 million in margin loans, and $15 million available on our credit facility, which was drawn down subsequent to year-end for the funding of the acquisition of five communities. We also have $28 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory. And now, let me turn it over to Eugene before we open it up for questions.

[Eugene Landy:]

Thank you, Anna. As Founder and Chairman of the Board of Directors, I am pleased with the substantial progress UMH has made in its long-term strategic business plan. At double-digit annual earnings growth over each of the past four years is an achievement to be proud of. UMH is part of the housing market. We have seen numerous demand tailwinds propelling out industry for a decade the U.S. has been building fewer homes than the 1.5 million homes needed to provide for new family formation and the replacement of older homes. Today the available home inventory is shrinking. The deficit in the housing starts ultimately needs to be filled. The demographic picture is very favorable. The unemployment rate has continued to drop and is now under 5%. Wages have begun to rise. These factors enhanced household formations by millennials, the largest segment of the U.S. population. With rising demand comes rising prices, the affordability of our homes becomes more and more apparent. The future housing and business prospects for UMH Properties are excellent. As Sam stated, we have reached the point where our dividends are now once again covered by our normalized FFO. The free cash flow above and beyond that dividend requirement is the path that ultimately leads to dividend growth. We continue to be focused on our business plan and have positioned ourselves to strong growth in 2017 and beyond. We will now be happy to take questions.

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Craig Kucera of Wunderlich. Please go ahead.

[Craig Kucera:]

Hi. Good morning, guys.

[Anna Chew:]

Good morning, Craig.

[Craig Kucera:]

Hey there. I wanted to talk about the acquisitions you closed on earlier this year. Can you talk about the going-in cap rates on those acquisitions? And just give us some color on maybe how we should think about the incremental expense to clean those communities up maybe this year and even next year?

[Eugene Landy:]

Well, firstly, instead of going-in cap rates, the thing we focus on most is the real estate. We are very focused on buying parks that have substantial vacancies and that we can fill those vacancies by purchasing new manufactured homes to use as rental units. We of course are conscious when we buy these parks that we want to return our investment and we want to return our investment of between 6% and 7%, but that return is not the critical factor because the critical factor is the return on our investment after we purchase additional rental units. And when we fill the parks and those numbers I believe in the 10-K and Annual Report Sam will cover, is the kind of returns we get with all the factors per placed in. It would be an overstatement to say that we're buying a substantial number of units, but nothing, but the lots are very valuable. The empty space is a very valuable and they are particularly variable if we are enabled to put in homes, rent them and do that over process of two or three years. As we always point out, there are costs involved. For some reasons we have to expense the cost of upgrading the parks we bought. We have expense a lot of the costs, we are getting the lots ready for the rental units and the first year or two the returns we report are not substantial and neither are they significant. The returns that we get when we fill these parks with the rental units are very substantial and we're very pleased with our program for buying new communities. We've gone from 7,000 units to 18,000…

[Anna Chew:]

19,003.

[Eugene Landy:]

19,003. We've added about 12,000 units to our portfolio and we're very pleased with the results of this accretive acquisition program.

[Craig Kucera:]

Okay. So I guess let me ask it a bit differently then, because I agree. I do see the value on the backend. But in the near term, it was a fairly large - at least from a unit purchase size relative to the portfolio. So somewhere - asking it a different way, have you seen cap rates move up since the election? I know last year, you guys were - you didn't acquire as much as you had maybe in the prior year or two. And just trying to get a sense of what you are seeing in the market.

[Samuel Landy:]

The cap rates continue to go down. I mean you have to pay more for the properties - it’s Sam Landy here. Now you are closer to a five cap, six cap on what people are asking on acquisitions, but the acquisitions we did in 2016 were exactly what we're looking for and usually doing, three communities, 289 sites with 215 lots occupied, 74% occupancy that we looked at the employers surrounding those communities and we looked at the area and we're sure that because we have the money to invest in upgrading the properties and adding rental units, we will do better than the prior owner. The later acquisitions that are 2017 include Boardwalk and Parke Place which that's kind of a rather unusual acquisition for us because those were first class communities. Boardwalk is 195 sites, 98% occupied. Parke Place is 364 sites, 76% occupied. Both first class communities with swimming pool clubhouse, they are 6.5% to 7.5% cap rates going in. But the most important thing to now they adjoin - those two communities are adjoining and they adjoin one of our communities giving us approximately 900 sites in one location in Indiana and when you expand the number of sites, if we take a 160 lot community, we make it 320, every lots more valuable because of the efficiencies of running all those sites from one office. So Boardwalk and Parke Place, plus the community we already owns there, Highland will all have top-notch management. They will be better able to generate sales income, rental income and the value of our existing sites plus those sites will now go up because they're all together.

[Craig Kucera:]

Got it. Looking at your CapEx for this next year, I think in 2016, you expected to maybe spend $15 million on CapEx. Can you talk about what your CapEx plan is for the next year, and how many rental units you think you will likely put into the ground?

[Samuel Landy:]

Sure. So the CapEx is $8 million with $4 million being the CapEx for our existing properties and $4 million for the upgrades to the acquisitions that we just announced and are doing. On top of that, we hope to add 900 rental units with the cost of the rental unit plus the setups 40,000 a sites of $36 million that will generate [7,200,000] a year in new income. Our other capital need with sales increase, we finance home sales and we need the money to finance those home sales and we're hoping to improve sales in excess of $10 million with $5 million of that being financed by us and those are your capital needs.

[Craig Kucera:]

Got it. And it looks like post these acquisitions your line of credit is more or less maxed out. But you do have room to use the margin or use your borrow on margin against securities. Is that how we should think about you funding yourself this year? And as far as the mortgages rolling off this year, is there likely a positive spread between those coming off maybe somewhere in the 6% range being able to refi maybe in the low-to-mid force?

[Anna Chew:]

Hi, Craig, this is Anna. Regarding our line of credit, yes, it does mature this year, but we are in the process of renewing it and expanding it. That's number one. Number two, we do have availability on our securities portfolio, but don’t - we want to be conservative with that. So we never take it up to the full availability. The third question that you had with regarding the mortgages that are coming off this year and we believe that we will be able to refinance those at approximately I would say between 4.5% to 5% maybe a little lower than the 5% and also obtain money additional funds from that because some of those are hasn’t mortgage for 10 years and we've had built in gains on those.

[Craig Kucera:]

Got it. And one more from me and I'll jump back in the queue. I guess looking at your rental unit occupancy over the past few quarters, it does look like it has dropped a bit year-over-year and can you give us some color on traffic and maybe how renewals have been trending?

[Eugene Landy:]

Traffics better than ever, renewals better than ever, the number 91% factors in new homes setup, but not yet occupied, factors in acquisition of communities that have rental units that may need upgrading to our standard. So everybody I talk out in the field, our managers, regional managers all say demand is as strong as stronger than ever. I know that the rate of our views on our website and the traffic we're generating are higher than ever.

[Craig Kucera:]

All right, thanks guys.

[Eugene Landy:]

Thank you.

[Operator:]

And the next question comes from Brian Hollenden of Sidoti. Please go ahead.

[Brian Hollenden:]

Good morning and thanks for taking my call. To follow-up on the last question, are you seeing specific pockets of strength in rentals or is the demand broad-based?

[Samuel Landy:]

Well, it's broad-based, but the important point there everything UMH did is intentional. So first of all, our capital structure is intentional, which gives us $1 billion worth of assets with only 30 million shares outstanding. Second of all the location of our properties is intentional. The Marcellus and Utica Shale area, the Nashville market, the Memphis market, Indiana, right now we're told that they need 50,000 people to come to Elkhart, Indiana to fill the jobs and they don't know where they're going to house them. So every location we went to, first of all, we know the difficulties and the expense of trying to obtain approved lots, that’s a near impossibility. And then we found that these communities were for sale with vacant site due to - I go back to NAFTA that when we sent manufacturing overseas, these jobs left these areas and these communities that were once 100% occupancy occupied fell down to 65% occupancy. So we were able to purchase these communities and the reason we did it was visiting our own communities that had the same problem. We found that the extended stay hotels were 100% full and we were looking into what was going on and this is seven, eight, 10 years ago and we found out about Marcellus and Utica Shale and the fact that there is natural gas and oil in the ground there and that pipelines are being built to bring the natural gas to our ports. That pipelines are being built to run the natural gas to the Panda plants that generate electricity and the gas is being run to our cities. All of this is still in its infancy and the demand for natural gas increases every year, the building of factories that will convert natural gas to plastics. All of these things are just beginning. So this region of the country, which had a devastated economy for the past 10 years, may now be one of the fastest growing areas of the country and UMH was very fortunate and acted very opportunistically to acquire these communities and we are only starting to show you what's going to happen here.

[Eugene Landy:]

Yes. This is Gene Landy, Chairman. If I could answer what I think is implicit in your question, the apartment REITs in the United States are doing a wonderful job. They've been building 200,000, 400,000 units. They have been building units the cost of $250,000 to $300,000 a unit. They are satisfying demand in the urban areas. They're building studios and one bedroom, maybe 15% of that amount two bedrooms, so when you read about what's happening in the apartment area do not transpose that over to the affordable housing area that UMH is in. We are in a different market. We produce 1,000 square feet of home, two bedrooms, three bedrooms and we want them for $800 a month and the demand is very strong and it is remaining strong. So I just wanted to make sure that when you see apartment REITs reporting some softness that we are in a completely different market than we are.

[Brian Hollenden:]

Thanks for the color. And just have one additional question. Can you talk about the financing environment for individuals? Has there been any change in 2016? What specifically could happen in 2017 to improve home sales for individuals?

[Samuel Landy:]

UMH was able to obtain a higher rate of approvals in 2016 working with Triad, so we were very happy with that, but things can still get way better. Dodd-Frank, the SAFE Act, and Truth in Lending come together to prevent waiters and waitresses from buying houses that they prevent - a person could be coming from a $300,000 house they couldn't afford, now they want to buy a $40,000 house, but they have bad credit from the $300,000 house they're prevented from buying a house. People with student loans, somebody can graduate Harvard Law School and they have their debt and they can buy a $40,000 manufactured home. So the rule has come together to absolutely stop us from financing the people who could benefit the most from owning our houses. We've spoken directly with both the Democratic and the Republican leader of the House and the Senate, everybody agrees their needs to be changed, they were unable to do it before the election and hopefully it will get done after the election.

[Brian Hollenden:]

All right. Thank you for the color.

[Operator:]

[Operator Instructions] The next question comes from Michael Boulgaris of Boulgaris Investments Inc. Please go ahead.

[Michael Boulgaris:]

Good morning and congratulations on an outstanding year.

[Samuel Landy:]

Thank you.

[Michael Boulgaris:]

Sam, Hillcrest Crossing northeast of Pittsburgh has I guess an occupancy of about 40% according to your, I think, supplemental. Can you share with us your expectations of this newly acquired community in the context of the Shell petrochemical complex that are currently being built in Beaver County?

[Samuel Landy:]

Yes. We’ve done incredibly well in this area; anything near Pittsburgh including one of the communities is six miles from the Pittsburgh Airport. So this particular community it's not far from shopping malls, it's not far from highways, and it looks like it had 15 plus really bad years and it is definitely going to take us three, four years to turn this around, but we bought it for less than the cost of having the land and getting the approvals $12,500 per site we purchased it for. We're going to fix that up, add rental units, generate home sales, and we’ll easily make it worth $30,000, $40,000 a site. I should take a moment to thank the entire UMH staff for the incredible job they did getting us here. And we have a Vice President and Regional Manager out there. They've done a tremendous job. We just closed on this particular community. They're removing homes every day. They're bringing in the new homes and renting them out. They're going incredibly fast. But I would still say it's going to take three years to turn it around, but we're doing an incredible job there. Part of the reason it takes three years. We have to change the reputation of communities and that's probably actually the hardest part that you make your changes the first-year, the second-year people start to see them and it's only the third-year that it has a new reputation and the occupancy really starts to increase quickly.

[Michael Boulgaris:]

And if we could go south a bit, you had some challenges with I think the utility company in some of your Tennessee expansion. Can you provide us an update there?

[Samuel Landy:]

I'm very happy to tell you that Memphis Blues is now officially opened. Six homes are already rented. There's 15 homes fully setup with another 15 homes being setup in the next four weeks. And we expect at the next call, we will have most of those occupied.

[Eugene Landy:]

This is a pioneering project. I was actually pleased to hear that one of the largest homebuilders is also doing a similar project. So we're doing a housing development, a conventional housing development, except for the fact that we're not going to sell the homes, we're going to rent them. And one of the convention homebuilders and we know is doing 250 homes and is not putting them up for sale, but it's going to rent 250 homes. And we and Memphis with Memphis Blues will have a brand new community and we will not sell the homes, we will rent the homes. And we think the - and it’s right in Memphis itself, it’s a great location and we're very optimistic that we can build a community, put the homes in and have an all-rental community.

[Michael Boulgaris:]

Thank you for that color. Anna, can you break out our home sales for the quarter and give us some sense as to your outlook for the current year in this - in-home sales?

[Anna Chew:]

Sure. For the quarter - quarter-by-quarter, in the first quarter we had about $1.7 million in home sales, in the second quarter it was about $2.8 million, in the third quarter it was about $2.3 million, and in the fourth quarter it was $1.8 million for total of $8.5 million in home sales. Of course, this is still not up to where it was in pre-recessions levels where we have $16 million in home sales for one-year and we made $1 million to $2 million. We would like it to go up. It all depends on a lot of things, the economy, it depends on the regulations, and hopefully the regulations will ease as Sam has mentioned and that we will go back to the pre-recession levels. Don't forget also that we have more than doubled the size of our portfolio. When we had the $16 million in sales, we only had 28 communities, now we have 106 communities. So we believe that if home sales go back up, we will really make this a profitable center for UMH.

[Michael Boulgaris:]

Okay. Finally, Sam, perhaps you can speak to the overall momentum of the business heading into 2017 and some of your goals that you have. Maybe you or Gene, I know, I think congratulations is in order. You said you would grow into the dividend and you did. But looking forward, can you provide us some guidance as to the criteria that the Board might employ when considering a dividend boost?

[Samuel Landy:]

Start at the beginning, first, national shipments for the year up 35% and we really have to thank the manufacturers, all the manufacturers we work with Clayton, Cafko, Skyline, Eagle River, all the manufacturers, they produce a fantastic product, the three bedroom, two bath, beautiful kitchen, home's, single roof, vinyl sided. It's a great house. And our customer - no common wall neighbor above them, below them, they get it yard, they have everything. So the demand for the product, it goes all the way back to 1999 when the recession of manufactured housing started, eventually we lost our distribution network of independent dealers. So a lot of people don't really know about the manufactured home product and every day we get that message out more and more, more and more people see our houses for the first time and as they get to know the product they readily accept the product and because societies change from wanting to own to wanting to rent, they really except the rental product very quickly. We rent 900 homes in a year. As per sales, the higher rent homes, the 55 and older, those people need to be able to sell their existing house and have equity to buy a home and because home prices arising, we really see that happening. In addition to opening Memphis Blues, we are also in the next month opening up the Brookview expansions, which is in Greenfield just outside Saratoga and that's 54 a lots of houses that are going to sell for well over $100,000. So we believe that we have a lot of opportunity to increase the sales income. Now looking strictly at without the sales income adding 900 rental units adds $7.2 million. The current expense ratio is 47%, but what I see is that the expense ratio on the new revenue is even lower than that, but however if you factored in between the 4% rent increase, which you've got almost $100 million in revenues so let’s round that down to $3 million and we have $7 million in new rental. So you have $10 million in same-store new revenue that's somewhere around a 47% expense ratio. So we should be able to bring plenty of new income to the bottom line and then as the Board we’ll have to discuss, do you believe you need of cushion in FFO over your dividend or can you dividend be with same as your FFO. But to me there's no question, the FFO per share is going to increase and we're going to be able to make that choice. And I'd add to that fact, UMH substantially increases the value of properties we own and we have almost $1 billion in assets with only 30 million shares outstanding. So the increased value in the appreciation I mean something's got to be done with that and that's got to go somewhere, so let's - or something to discuss.

[Michael Boulgaris:]

Thank you for that color, and I’ll jump back into queue.

[Samuel Landy:]

Thank you.

[Operator:]

The next question comes from Chris Reynolds of Neuberger Berman. Please go ahead.

[Chris Reynolds:]

Good morning, gentlemen.

[Samuel Landy:]

Hi, there.

[Chris Reynolds:]

I have a general question about the acquisitions that you've made. You've been very proactive and grown the Company rapidly. But I would think that there might be some or a surplus real estate that perhaps could be monetized that might be more suitable to another developer or - and you could free up some cash. I think I'm wondering if that's a possibility or whether everything that you've acquired will be put in operation as you envisioned?

[Eugene Landy:]

I seldom sell anything and over the years, we've seen that we hold on to the parks and they go up and value tremendously. We take a much longer term view than most companies. We see that the population of the United States is growing maybe by as much as 3 million a year as there was inflation. The areas we are in are excellent and I really don't know of any parks that we would consider selling. On top of that you have to understand, we have an excellent business plan to monetize the increase in value as long as we have this Freddie Mac program. We will have the private investors with collateralized mortgages. We are able if we can increase the value of our parks go back in three, four, five years later and refinance our parks. And we've done that successfully and Anna has done a wonderful job of that and have relationship with the lenders are excellent and some of the lending programs are tremendous programs, but it does take a while. You have to fill the park, turn the income around, increase the income and then go back in and get a new mortgage. And when you get the new mortgage you have an awful lot of cash. We are buying our rental units. We've invested as much as over $150 million in rental units. And we've done that to the preferred stock to refinancing and as we see it two, three years from now we're going to refinance a lot of our products and generate an awful lot of cash. So we see no reason to try to generate cash by selling off our assets.

[Samuel Landy:]

I just want to point out. We are in the process of - we're being approached about Marcellus Shale leases again where people will pay us per acre for drilling rigs and then you get a percentage. We are getting approvals for additional sub storage units on our vacant land and expect to increase our number of sub storage units to a 1,000 units in the next three years. And we do look at the vacant land constantly to look at the best vacant land in terms of its highest and best use. And we wouldn't be opposed to - we have a piece across from our hospitals that might be a good piece to build a medical office. So we look at that and we consider what to do with it, but at this time the vacant land is sitting there.

[Chris Reynolds:]

Okay. Well, terrific. Keep up the good work. Very impressive results.

[Samuel Landy:]

Thank you.

[Eugene Landy:]

Thank you.

[Operator:]

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Samuel Landy for any closing remarks.

[Samuel Landy:]

Thank you, operator. I would like to thank the participants on this call for their continued support and interest in our Company. As always, Gene, Anna and I are available for any follow-up questions. We look forward to reporting back to you after our first quarter. Thank you.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. The teleconference replay will be available in approximately one hour. To access this replay, please dial U.S. toll free 1-877-344-7529 or international 1-412-317-0088. The conference ID number is 10100433. Thank you and please disconnect your lines.