Good morning, and welcome to the UMH Properties' First Quarter 2018 Earnings Conference Call. All participants will be in 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.

Thank you very much, operator. In addition to the 10-Q that we filed with the SEC yesterday, we have filed an unaudited first quarter supplemental information presentation. The supplemental information presentation, along with our 10-Q, 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 first quarter 2018 earnings release and filings with the Securities and Exchange Commission. The Company disclaims any obligation to update its forward-looking statements. In addition, during today's call, we will be discussing non-GAAP financial metrics. Reconciliations of these non-GAAP financial metrics to the comparable GAAP financial metrics, as well as explanatory and cautionary language, are included in our earnings release, our supplemental information, and our historical SEC filings. Having said that, I would like to introduce management with us today, Eugene Landy, Chairman; Samuel Landy, President and Chief Executive Officer; Anna Chew, Vice President and Chief Financial Officer; and Brett Taft, Vice President. It is now my pleasure to turn the call over to your UMH's President and Chief Executive Officer, 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 first quarter ended March 31, 2018. UMH's first quarter earnings for 2018 continue to demonstrate the success of our business plan. Both core FFO and normalized FFO for the first quarter of 2017 were $0.18 per diluted share representing an increase of approximately 6% year-over-year. Our normalized FFO for the quarter fully covered our $0.18 dividend. During the quarter we continue to increase our liquidity and strengthen our financial flexibility and balance sheet by issuing 2 million shares of a new 6.375% Series D Cumulative Redeemable Preferred Stock for net proceeds after deducting the underwriting discount and other estimated offering expenses of approximately $48 million. This additional capital will be used for general corporate purposes including acquisitions, expansions of communities, and for the purchase of additional rental homes. We anticipate continued per share earnings accretion once this capital is fully deployed. Community NOI rose from $13 million for the first quarter of 2017 to $14.5 million for the first quarter of 2018 an increase of 11%. Our same property results have continued to improve. Same property occupancy increased by 249 sites representing a 170 basis point improvement over the prior year period. Same Property revenue increased 6.5% driven by this occupancy again as well as rent increases to our residents. Year-over-year our weighted average monthly site rent increased 3.3% to $441 per site per month. For the quarter, same property expenses increased 7.9% primarily due to the harsher than normal winter resulting in increased snow removal, salary, heating, and water expenses. We expect expenses to normalize over the remainder of the year. Our same property NOI increased 5.4% for the quarter. These strong results continue to validate…

Thank you, Sam. Core Funds from Operations or Core FFO was $6.4 million or $0.18 per diluted share for the first quarter of 2018, compared to $5.1 million or $0.17 per diluted share for the prior year period. In 2018, the changes in the fair value of marketable securities were recorded in current period earnings. Core FFO excludes this change in fair value. Normalized FFO, which excludes realized gains on the sale securities and other non-recurring items were $6.3 million or $0.18 per diluted share for the first quarter of 2018, compared to $5 million or $0.17 per diluted share for the prior year period, representing an increase of 6.3% on a per share basis. Rental and related income for the quarter was $27.3 million, compared to $24.5 million a year-ago, representing an increase of 11%, primarily due to community acquisitions, the addition of rental homes and the growth in occupancy. Community NOI increased by 11% for the quarter from $13 million in 2017 to $14.5 million in 2018. Community operating expenses were 46.8% of total rental and related income for both the first quarter of 2017 and 2018. As with our same-store expenses, a harsher than normal winter resulted in increased snow removal, salary, heating and water expenses. As we noted in the past, most of the community expenses consist of fixed cost and therefore as occupancy rates continue to rise and as we upgraded integrate our acquisitions these expense ratios will continue to improve. Due to the adoption of a new accounting pronouncement, effective January 1, 2018, our current earnings includes the change in fair value of our marketable securities. Previously these unrealized gains and losses were recognized in accumulated other comprehensive income on our balance sheet. As a result of this required accounting change, the Company recorded…

Thank you, Anna. UMH's first quarter results were an excellent start to 2018. We have delivered solid performance metrics with double-digit growth in rental revenue, home sales and total NOI. The housing market is strong and getting stronger. Conventional home prices have up 8% year-over-year in many markets. The value of manufactured home communities appears to be rising. Our focus is on creating value by building a large scale portfolio of communities that are fully occupied. The REIT market has been under pressure thus far in 2018 losing approximately 10% in value. The sellout has been driven by negative fund flows as a result of pricing interest rate peers. However, when increases in interest rates are driven by economic growth REIT's historically have still been well. Operating fundamental of REIT's remained very strong. Additionally, our portfolio generates substantial dividend income and keeping with our conservative principles we seek to limit us week securities, investment to less than 20% of our under depreciated assets. Our REIT securities portfolio provides us with additional liquidity to pursue opportunistic acquisitions in our core business. It also reduces our reliance on the capital markets for growth capital. We will continue to look for investment opportunities in REIT securities. In many cases REIT starts the currently trading at substantial discount of net asset value. Private real estate valuations remain high and cap rates of continued to compress. Real estate therefore going to times be cheaper on Wall Street than our main street. These opportunities allow us to diversify into liquid REIT securities well enhancing value by buying real estate and securitize for one at discounts from net asset value. Starting in 2018, unrealized gains and losses in value on securities holdings are included in our operating numbers. Management views REIT securities is a form of real estate ownership and in almost every case is pleased with the performance of the holdings. Our REIT securities portfolio has performed well for a decade, but has not performed as well over the past quarter. Review this as temporary and expect the value of the company's to better reflect their earnings and underlying property values. UMH's are well on its way to an excellent year. The appearance of Dr. Ben Carson the U.S. Secretary of HUB is the featured speaker at this year's Annual MHI Congress & Expo indicates government recognition of manufactured housing is quality affordable housing. Our excellent results could be further improved if retail financing becomes more available for our residents. Sales have improved substantially, but if a secondary market develops for manufactured home loans, our sales volume increase could be even more dramatic. We've increased revenue and income year-after-year by adding rental units. We project to continue to achieve our 4% rent increases throughout the year and to install another 800 rental units this year. The two combines added $10 million in new revenue in 2018. We will now be happy to take questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Rob Stevenson of Janney. Please go ahead.

Good morning, guys. Sam in terms of the occupancy gains during the quarter, any particular assets where you had a big jump or was it just widespread?

Now some places are doing better than others. In fact from January 1, 2018 Ohio is up 36 units, Eastern Pennsylvania down 4 units, Western New York plus 3, Tennessee plus 22, Indiana plus 49 units, Eastern Pennsylvania plus 5 units, Maryland unchanged, Western Pennsylvania down 3 units, New Jersey down 1 unit, and Michigan plus 10 units for a total of up 117 units since January 1.

Okay. And then was it one or two or three particular communities where you put a bunch of rental units in this quarter or whatever that help drive that or put them in last quarter et cetera that was driving the vast majority of that in any one state?

Well each of those states. So Ohio is up 36, Tennessee is up 22, Indiana is up 49, Michigan up 10. There are certain communities in those states that are doing extremely well, but those states are doing well. So we're not losing occupancy, we're gaining occupancy in each of those states - in each of the communities in those states.

Okay. And then the rental homes in terms of - are you guys seeing any cost pressures on that? Are they still being sold to you roughly at same rate or given what's been going on with materials and labor? Are you seeing 5% or 10% inflation in the price of the homes that you're buying these days?

So as a general matter the cost per unit has gone up $600 per unit, but in Eastern Pennsylvania and that area the price increases are much stronger in fact as much as 20%. So in the Eastern Pennsylvania, New Jersey area where home prices are always the highest, we're going to have to charge increase rents on rentals and increased prices on home sales in Eastern Pennsylvania and New Jersey. The remainder of the factory orders are up $600, that's about I think whatever the percentage is it's up about $600 per unit and we're able to pass that along to the resident.

Okay. And then in terms of the accounting adjustment for the securities portfolio, so gains and losses are going to flow through here. So if the portfolio is worth $5 million more than on June 30 than it was on March 31, there is going to be $5 million flowing through Nareit FFO on that quarter or is that a lower cost to market? Can you sort of expand on that a little bit is that how gains and losses are going to flow?

Sure. You have it right - let's say the market goes up which we believe that it will go up, but let's say it does go up. And for your example, you said $5 million we would be recording a $5 million gain for the quarter. And it is not lower across the market. What had happened was we have a $11 million gain at the end of the year then at the end of the quarter we had a $14 million unrealized loss. The two combined is the $25 million. We didn't lose $25 million –we didn't have unrealized losses of $25 million in our securities portfolio, we had a $14 million unrealized loss in securities portfolio. But because we are comparing it to a gain at the end of the year, it added up to $25 million. Going forward, we'll be able to record the gains.

Okay. And then sitting here 40, almost 45 days into the following quarter, where is that securities portfolio today versus the March 31? Have you guys bought anything out of size in that - to add to that portfolio since March 31?

We have not bought anything of size, however, the securities portfolio had gained in value as of today and it's an estimate. The unrealized loss of $14 million is now an unrealized loss of approximately - I'd say around $7 million. Of course that may not through to the end of the quarter, but if the quarter ended today, we would have a gain in our income statement of $7 million.

Okay and composition of that portfolio is fairly consistent with what it was when you reported it in the K at end-year?

Yes, it is.

Okay, and then lastly, depending on how long - over what time period that $75 million of acquisition comes through? You guys are doing call it, $10 million, $15 million maybe a quarter on the dividend reinvestment stuff? Do you plan on using the securities portfolio to help close at, is that primarily $75 million, the equity portion primarily going to be funded from the dividend reinvestment program and cash on hand. How are you guys thinking about the equity component of that $75 million if you guys close all of that?

We cut back on the amount of shares. We're selling and we're doing approximately $1.5 million a month, which is $6 million a quarter, but the dividend reinvestment is another $2 million. So there will be $8 million - $6 million - we're talk about $20 million a year at the current rate of issuing stock in the dividend reinvestment plan. And the DRIP and SIP, the rest of the money, we have - as Anna and Sam did every quarter, we're very liquid, I think we had $25 million in cash at the end the quarter, and we had unused bank lines, and so if we buy $75 million in [indiscernible]. So we hope to finance half - 60% of the purchase price and we will need $20 million, $30 million acquisitions and we need $32 million a year to buy rental homes, but we have ample credit to do that.

As of the end of the year, our Series D Preferred Stock Issuance of that $50 million was not fully utilized as a matter of fact most of it was not utilized. We are awaiting the acquisition. The acquisitions are taking a little longer than we expected as usual.

Okay and then what is the - beyond the $20 million that you guys expect to close in a next couple of weeks. The other $75 million - the remaining $55 million, how far out because that conceivably go, is that sort of second and third quarter or is that go through likely year end close the rest of the $55 million if it closes.

It goes through like the year end. We expect the portion of that to close in the third and fourth quarters and hopefully all of it this year, but there's a chance that some of it slips off until the first quarter of next year.

Okay, thanks guys.

Thank you.

Thanks.

The next question is from Craig Kucera of B. Riley FBR. Please go ahead.

Hey, good morning guys. If you guys are rolling out your increases in rent this year by 4%, can you talk about communities that you did that in the first quarter and then just how receptive the tenants are? Are you seeing any pushback or maybe increased turnover as a result of that?

Yes, so first last year we only raised the rend 4% on the lot and on the rental home as we only rent - we only raise the rent on the lot rent portion, the 4%, but not on the home rent. So that the increase in the home rental income from a year-ago is only up 2.8%. Again that's because it's only raised on the lot rent. This year we're raising both the home rent and a lot rent, the full 4%, it's not resulting in any vacancies. We're maintaining our 94.7% rental occupancy. Again at communities that are less than about 80% occupancy we may be more careful, but in general we're raising rents 4% on both the lot and the homes and it's passing through. I'd also point out that we had the $0.18 FFO for the quarter, but this was an incredibly hard winter, and - but for the hard winter, I think we would have done even better. But to answer the question on whether the tenants can pay the rent, the computer today tells us that three bedroom apartment, $1,100, $1,200 a month and I think we reported our rents are $725 a month. So we're $400 under the competition and we think our product is equivalent or even better.

Got it. Certainly to your same-store numbers they were going to again but your expense have been up and I appreciate the color on that being a challenging winter. But I think they've been mistakes 8% for the last three quarters on a year-over-year basis and I guess I'd like to know when you say they're going to normalize kind of where that goes is that close of the 2% to 3% or kind of what you're thinking?

So what I'm thinking about is our operating expense ratio was 47% and it's maintained at 47% despite the tough winter. But my belief is that it will continue to drop due to new rental units more communities that we've completed the deferred maintenance on and things of that nature. So I would expect that the expense ratio would fall from the 47% but the hard winter causes increased labor costs and snow removal other snow removal costs results in broken water lines additional water in sewer expenses. So all of those things have quite a detrimental effect to the quarter, so that I'm very happy we were able to report the $0.18 for the quarter.

Also I wanted to remind everybody that is what last year is we have added the 2016 acquisition which was a fairly large number of acquisitions it was almost 20,800 sites and that was at a 64% occupancy rate and so therefore it takes a little longer you we usually say thinks about three years. So therefore in 2017 of course the numbers have not come in as a strong yet and but we expect that they will continue to increase as we fill those occupancies.

Okay. One more for me and I'll jump back in the queue. You mentioned you were expanding I think 365 sites? Can you talk about what you're budgeting to get that done kind of what the looks on the back end?

So they say plus 70,000 site when to build the community get the approvals and things of that nature we've already completed the approval process are very close to a fully approved on these 365 lot. So you're certainly talking 50,000 per a lot and possibly more for the construction - the $20 million.

All right thank you.

Thank you.

[Operator Instructions] Our next question is from Omotayo Okusanya of Jefferies. Please go ahead.

Yes, good morning. Earlier on your prepared remarks you did mention if an alternative financing market did come up that it could really help to boost our home sales. I mean in this current government do you kind of see any probability of that happening.

So I had the personal opportunity to be one of 16 people to meet with Dr. Ben Carson. And Dr. Ben Carson knows how bad the financing situation was for manufactured housing and Dr. Carson very much wants to help our industry and realizes that manufactured homes in land lease communities are the solution to the affordable housing crisis. On top of that we met with Freddie Mac and Freddie Mac who are working on their pilot program, but they are talking about developing a very large secondary market for manufactured home loans. Both of those combined either one in and of itself which dramatically improve home sales for us for new home sales for our residents reselling their houses and also I always point out we want to keep the rental units forever because they're going to last 40 years and 8000 year for 40 years on a $40,000 investments are pretty good return. But if they create this secondary market, the financed value of those rental units could be substantial so that you might be better off selling them and earning the sales profit. So we'll see what happens but the government recognizes the problems and is trying to solve them.

[Indiscernible] bipartisan support for such a solution?

Yes, we've been working on this for years and we've met with the top Democrats, the top Republicans. And both parties have fully supported it - to support of the change the whole time they just haven't been able to find a way to do it.

Thank you.

Thank you.

The next question is from Michael Boulegeris of Boulegeris Investments. Please go ahead.

Good morning and congratulations on the steady progress. Sam in your Investor Presentation there's 220 acres for development in East Central and New York, and I think you've mentioned that before. Can you give us an update if there's any additional progress there?

That's the Coxsackie project, which is 18 miles South of Albany, a quarter mile from the Hudson River and you could see Hunter Mountain from the property. We bought it zone to allow a 330 space manufactured home community with City Water and City Sewer. Since then we've learned everything they can do to stop you from building a manufactured home community. That is what helped us understand the value of vacant lots when we're buying communities with vacancies. The impossibility of building communities makes it just a fantastic opportunity to buy existing communities at six, seven caps with 20% or more vacancies. To get those vacancies it's a great benefit to the company as demand increases because when you try to build the community it's an impossibility. So on the Coxsackie project at this moment we've met with top federal housing lawyers and we are I believe going to file a Federal Fair Housing Act case against the village of Coxsackie and hopefully we will get back to where we were in the beginning, which was that we're entitled to build a 330 space community on 180 acres with city water and sewer. But all of this has already taken 11 years and will still take another two to three years.

Appreciate that color. Can you share with us your expansion program in Tennessee, maybe I missed it in your opening remarks, but specifically in the Nashville area you seem to really had some great acquisitions there and turn those properties around it, it appears under the three-year window?

So Tennessee is doing fantastic in all locations, but countryside which is right near where the Spring Hill Saturn plant was that now became a GM plant I believe, a GM plant. We bought the community, it something like 70% occupied, it's now in the high-90%, and we're working on 100 lot expansion that's almost fully approved and we'll be building those 100 lots hopefully this year. Memphis Blues we built the first phase 38 lots and filled that within 12 months and now we're going to build the infrastructure for the next 100 lots with 51 lots being fully completed in 2018. Trailmont, which is north of Nashville 35 lots, Holiday Village 75 lots just north of Nashville. The north of Nashville market is incredible. We bought these communities when they were vacancies when other people weren't taking care of their properties. And today if you Google, Nashville Tall Skinny, you'll see that they're taking the vacant land that within two miles of our community and the land is still valuable, they're building these tall skinny units. And so we're already doing fantastic in Memphis and Nashville, but these expansion lots should be very beneficial. We're going to build a total of 365 lots this year and just looking at it…

Little over 200 is going to be - or 200 and something is going to be in Nashville area.

Thank you. And maybe Anna could you share with us your - perhaps conservative projection for home sales, it appears that they're trending in the right direction and also have price increases let say post last year's hurricane season abated?

Well so there's definitely a 4% increases on the cost of houses from all the factories and as mentioned it's even more substantial in Eastern Pennsylvania as much as 20%. That's our cost from the manufacturers. In terms of our home sales they're growing impressively, but at the same time that I say that with the exception of Tennessee where home sales are very good. Most markets are not comparable to what it was like to sell homes in 2005, 2006. We're not selling four homes per month at any location right now. And when you build an expansion four homes per month is what you consider successful. Incomes are rising. People have more money. There's more cash buyers. We have more traffic than ever acceptance of our product is great. But even with our double-digit percentage increase in sales, I believe we still have the opportunity to substantially increase it and at some point possibly even double it from where we are today.

And lastly, maybe a Gene, it shows petrochemical complex that construction continues in energy prices firm. What is your long-term outlook for UMH and maybe what's your core Western Pennsylvania?

It's very bullish. I just finished an article, Pittsburgh, the City of Pittsburgh, the first three months of this year. Applications of permits were up 50% and the as you know the oil and gas prices strengthening and there were only in the first inning of production. Pennsylvania produces more than the equivalent of 3 million barrels a day and most people don't realize that and the production will - has to be hooked to the pipelines and the delivered and the upstream and downstream businesses that come from this production. They're just beginning also I think it's been maybe 10 years we've been talking about the shell oil plant in Monaca. It's going to have 10,000 employees for four years to build a multi-billion dollar cracker plant and there's supposed to be two or three cracker plants from other companies built in the Ohio, which West Virginia and Pennsylvania area. The oil and gas industry is a huge industry. It produces huge dollar amount. It's labor intensive and we have a company that has maybe 25 of vacancies in five states. The economy is doing very well overall. We were fortunate enough to pick Indiana and Nashville, Western Pennsylvania, the Eastern Ohio, which is doing even better than the overall economy, which is - with the overall economy is good, but the regions we were in the doing even better than the average. So we're very, very bullish on the future. There is a housing shortage - there is a housing storage as we've collected in the 8% increase in home values, almost everywhere in the United States and the fact that home is now in 25% of the cases are selling for more than the asking price that strong evidence that the market is very strong and getting stronger. So UMH property, I think is very optimistic about its existing holdings and its ability to acquire communities and turn them around and build a sound platform that will have fully rented.

Thank you.

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

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 and I are available for any follow-up questions. We hope to see you at Nareit REITWeek event in June and we look forward to reporting back to you after our second quarter. Thank you.

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