Good morning and welcome to UMH Properties First Quarter 2017 Earnings Conference Call. All participants will be in the 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. 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 first quarter 2017 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; 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.

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, 2017. Core FFO for the quarter was $0.17 per diluted share in both 2017 and 2016. Normalized FFO for the first quarter of 2017 was also $0.17 per diluted share representing an increase of 6.3% year-over-year. Community NOI increased 16% year-over-year. Same-property NOI increased 12.6% year-over-year driven by a same-property occupancy gain of 180 basis points. UMH had a busy quarter on the acquisition front. During the quarter, we completed the acquisition of five communities containing approximately 1,300 developed homesites situated on 382 acres for an aggregate purchase price of approximately $36.5 million. The weighted average occupancy of these communities was 63%. We have a proven history of improving communities that we acquire by making the necessary investments to bring them up to a high standard. UMH further recognizes that vacant sites have significant value when the economies surrounding those vacancies improve. Our portfolio is now comprised of 106 communities with 19,300 developed homesites located throughout seven states. We are very proud of our high quality portfolio and we're recently honored with the manufactured housing expertise, Land-Lease Community of the Year Award for the Northeast Mid-Atlantic Region. This award was for Port Royal Village of 465 sites all-age community situated on approximately 101 acres. This award showcases our dedication to providing quality affordable housing at all of our locations. We will continue to focus on acquiring communities with significant upside potential and leverage our expertise to build long-term value for shareholders. This task is becoming increasingly difficult given the attractiveness of the asset class. Manufactured housing delivers a high quality income stream that many firms and investors are seeking and therefore demand…

Thank you, Sam. Core funds from operations or core FFO was $5.1 million or $0.17 per diluted share for the first quarter of 2017 compared to $4.6 million or $0.17 per diluted share for the prior year period. Normalized FFO which excludes realized gains on the sale of securities and other non-recurring items was $5 million or $0.17 per diluted share for the first quarter of 2017 compared to $4.4 million or $0.16 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 $24.5 million compared to $21.8 million a year ago, representing an increase of 13% primarily due to community acquisitions, the addition of rental homes and the growth in occupancy. Community NOI increased by 16% for the quarter from $11.2 million in 2016 to $13 million in 2017. This is the 11th consecutive quarter that we have delivered double-digit year-over-year NOI growth. Community operating expenses for the quarter were 46.8% of rental and related income representing a 170 basis point improvement over the 48.5% expense ratio for the prior year period. As we noted in the past, most of the community expenses consist of fixed costs and therefore as occupancy rates continue to increase and as we upgrade and integrate our acquisitions, these expense ratios will continue to improve. As we turn to our capital structure, at quarter end, we had approximately $387 million in debt of which $305 million was community level fixed rate mortgage debt at a weighted average interest rate of 4.4% and $82 million were loans payable at a weighted average interest rate of 3.1%. 80% of our total debt is fixed rate. The weighted average interest rate on our total debt is 4.1% compared to 4.3% in…

Thank you, Anna. UMH is celebrating its 50th year of operations. As Founder and Chairman of the Board of Directors, I'm pleased with the substantial progress UMH has made in its long-term strategic business plan. As Sam mentioned over the past six years, we have more than doubled the size of our portfolio by acquiring 66 communities containing approximately 10,400 homesites. We have increased occupancy and revenue with these communities thereby generating significant increased value to our shareholders. UMH's first quarter results were an excellent start to 2017. We have delivered solid performance metrics with double-digit growth in rental revenue, home sales, total NOI, and same-property NOI. The performance of our securities portfolio has been excellent. We are very pleased with our current holdings which had a $14.7 million in net unrealized gains at quarter end. The future prospects for UMH Properties are excellent. We continue to focus on our business plan and have positioned ourselves for strong growth in 2017 and beyond. We will now be happy to take questions.

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

With the acquisitions you completed this quarter they were all in kind of mid-to-late January. What was the impact to operating expenses quarter if any and how should we think about what the budget is to may be clean those up this year and next year, if you can provide that?

I think in the beginning, we had additional -- some additional expenses but I believe that before the end of the year, we will bring it back down to our normal operating expense ratio of about 46%, 47%.

Got it. So we should see a bump I guess in the next quarter or so bringing down --

Yes.

Then coming back, okay. This is a big quarter for acquisitions for you and I appreciate the commentary on the market and may be doing more one-offs but how should we think about the rest of the year, do we think that first quarter was probably the bulk of acquisition volume for this year?

Yes, this is Brett Taft here, Vice President of Acquisitions and we have only one property in our pipeline right now for about $4 million, we are working on a couple other one-off deals nothing, I'd like to comment on too much further right now but I would expect some continued growth throughout the year.

Got it. With the administration change and turnover in Congress are you hearing or seeing any movement in regard to loosening lending as regards to manufactured home sales?

We just returned from the MHI Conference in Las Vegas and there was very, very upbeat. We're making substantial progress on all the legislative fronts. We are making very good progress with FHA, with Freddie Mac. We are very optimistic, it's going to take a little more time but we think our ability to get the government sponsored entities to provide mortgages on our products and hopefully channel mortgages on homes for both of us and our tenants. So we think the legislative front, we're going to make substantial progress and we really should I mean the regulatory environment used to be very restrictive and we're hopeful that we can expand our lending and expand our ability to finance new communities.

Okay, one more for me, I will jump back in the queue. With the expansion of the line, are you likely to utilize that more heavily and keep a higher balance on that or you more inclined to continue to predominantly finance yourself with mortgages?

Well we do a little bit of both because right now the interest rates are really -- the protected low interest rates are great for us while mortgages and we can get 10-year financing at a fixed rate of around I would say between 4.25 to 4.5. So we'll do a little bit of both, some of the communities that we purchase do not qualify for Freddie Mac or Fannie Mae financing because again we're buying 63% or 60% occupied communities, those we can put in the line and utilize the line.

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

Good morning guys and thanks for taking my call.

Thank you.

Can you talk a little bit about I noticed year-over-year the proceeds from the Trip program kind of was about $13.5 million higher, just may be talk about a little bit why the big change?

Well I really like the Trip and Sip and we've been really pushing very hard to get on the MSCI Index and the RMC Index which we balances I think Monday. So we will find out Monday if all our efforts are successful. The higher capitalization you have the more likely you're going to get on the index and we've increased the outstanding shares to 31 million shares and at the current market price, we're very close to $500 million market capitalization and isn't this always but one of the reasons we've been interested in raising capitalization rather than borrowing money or issuing more preferred is because of the way the index works. And we're one of the few REITs that is not on the index and we're going to find out if we go on the index with the milestone for the company but we have no control over that, that's done by the people who run the index.

Appreciate that color. Turning now may be to the sale of manufactured homes, seasonally the first quarter and the fourth quarter are weaker due to weather, but what are you kind of seeing as we move into the spring and what's going on, on that front, can you talk a little bit about the sales effort and may be what we should expect over the next six months?

Well I believe we're seeing improvement in sales. We have the sale centers at Port Royal Village, Heather Highlands, Sunnyside, and when there's no sales, it's very hard to properly staff those or get them going but as sales improve, success generates success, so things are getting better and I think we could do far better and I think 2017 may be a turning point on sales but it's still just the start of what we can really do.

In a way home competition, the rental program is so successful. It is so well received $750 to $850 a month we provide a three bedroom home with two bath which is very competitive in the area and it's really a good deal for the consumer. And at those costs we compete with ourselves on semi-homes particularly unless we can get lower cost financing. Competitively people are renting but we're very happy that rentals are doing so well. And if I make one more observation which I make every time, the overall housing situation in the United States is that there's a shortage of housing and there's a really serious shortage of affordable housing and we're in markets that are growing and population growing and workforce. So our prospect is not quarter-to-quarter but year-to-year is very good in our opinion.

Thanks. And I'm sorry if I missed this earlier but did you sort of update expectations on how many rentals you do plan on adding in 2017 is 800 to 1,000 about the right number?

That's right. That's the right range. We acquired some rentals in acquisitions and we -- demand certainly has allowed us last year and most likely this year to add 800 on our own. So somewhere between 800 and 1,000 is most likely.

Okay. And any maybe just last for me and I will get back into queue any major changes in the Marcellus region in terms of demands?

Well, yes, the minute after the election, we got calls from the drilling companies et cetera that they were hiring again and that they needed houses and I'm talking about it was two days after the election and also we're going to close on our first gas lease in a number of years, where we sold the drilling rights for $265,000 and 19% royalties and that should close this month I believe, yes.

We're still as bullish as we go by at every presentation on what the Marcellus and Utica Shale will do so the areas in which is located which includes the main areas in which we have communities.

The next question comes from Paula Poskon of STOV Advisory Services. Please go ahead.

I just have one follow-up on your commentary about your all-rental community in Memphis that you're working on. Are you optimistic that an all-rental community will make it easier to get financing through the GSCs? And more broadly what is your appetite for having more all-rental communities in the portfolio?

Well we think it's a great model and we love to do it again and again. An apartment builder builds a 1,000 square foot three bedroom two bath units for $250,000. We could build it for about $100,000 and that makes us extremely cost competitive for the people who want housing plus there's no common-wall neighbor above you, below you, or under you. So as a rental product, the acceptance is incredible which is why we're renting out 800 or 900 homes per year. We're really looking forward to completing the occupancy of Memphis Blues. There's currently homes rented there. The grand opening is actually not going to be until next month but even before the grand opening, we've rented houses and it's going very well. And yes, we look forward to doing more and Anna will tell you about the financing.

Well what we’ve done is we have a roundtable discussion with the GSCs as matter of fact with Fannie Mae and then we had a meeting with Freddie Mac. And they were very receptive to this program. They don't know if they can do it yet but they are thinking about it when we have an all-rental community because as we've pointed out, it's very similar to a garden apartment. They have questions regarding of course the maintenance of it but I said it’s just like any other maintenance of a garden apartment what is the difference. So they were very receptive to it, they're thinking about it, we can't do anything of course until it is more built up and more occupied. But they have it in their radar screen.

Thank you. And just one last question on that, do you expect there will be any difference in the expense ratio in managing an all-rental property versus an ownership rental mix community?

Interestingly, right now new revenue was coming in at a 36% expense ratio which is lower than the current overall UMH expense ratio. So you have to factor in these are brand new rental units but I don't see any reason that it's good, the expense ratio is going to exceed our norms which are 50% if we are paying the water and sewer, and 30% if it's direct billed to the resident. So it seems like all is going very well on the expenses in managing the rental units and at this moment I see no reason to believe that's going to change.

Of course it's the beginning because we are in the beginning phases of Memphis Blues, there are some I will call them fixed costs which we will have to go over as we build the community.

The next question comes from Michael Boulgaris of Boulgaris Investments. Please go ahead.

Thank you, good morning and thank you for taking my question. Sam could you give us an update as to the progress in Saratoga?

Yes. We've completed approximately 63, 64 lots. We're ready to go. There is homes setup, they are absolutely gorgeous, the timing is perfect because Saratoga is a very seasonal area and we're really looking forward to kicking this off. We already have interest in a couple of homes of sale and we're very excited about it and it's ready to go.

And mentioned you comment on just traffic overall by region that you're seeing earlier this year?

Yes, we have a traffic report that tells us how we're doing on traffic. And it is higher than ever for the season. I mean quarter two was usually your highest traffic of the year but quarter one 2017 well dramatically exceeds 1,400 homes was the traffic in quarter one 2016, a little over 1,600 was the traffic first quarter 2017.

Okay. And I'm going to miss it but I believe same-property occupancy was 84.5% at year-end 2016. Could you refresh me what the same-property occupancy was at the end of Q1?

At the end of Q1, same-property occupancy, now don't forget it's a different same-property pool because we update it every year. Same-property pool for 2017 are properties that were owned as of -- see January 1, 2016, and same-property occupancy for the 2016 numbers were properties owned as of January 1, 2015. So you have to take that into account. But the same-property occupancy as of March 31, 2017, on this new pool is 81.9% compared to a year ago, this pool was 80.1%.

Very well. And Anna with the I guess the number of acquisitions in Q1 was above the operating expense a bit frontloaded this year or maybe you could just -- if you could give us some guidance as to where that's going to level out some in terms of the rate of growth?

Absolutely we always have a little more expenses when we first acquired the community well, some cleanup et cetera but we believe that these communities will generate approximately the same expense ratio as our other communities.

And just to add a little more color there. Two properties we purchased in Indiana were very high quality; we shouldn't expect too many increased expenses on that front. One of the properties acquired in Ohio and one of the properties in Pennsylvania will require a little bit more of an increase in initial expenses but the way we've structured our acquisition program, we intend to take care of them within the first six months in ownership now, the other property in Ohio should not dramatically increase expenses, so.

And Brett, tell him about how optimistic we are on Hillcrest and what's going on there.

We purchased Hillcrest Crossing in Lower Burrell, Pennsylvania it was a -- it is a 200 site community it was purchased 40% occupied, the old owner just did not have the resources they needed to make it move forward. We demoed about 30 to 40 units in the community already it looks fantastic, we have 20 homes on order all of which are spoken for. So we expect to infill that community very quickly at some meaningful value.

Are you saying is that petrochemical complex starting to be more impactful in terms of your Western PA occupancy?

Yes, this is the Pittsburgh area that's where Hillcrest is and we know just what happened nobody in the area did well for 10 years and they're basically giving up and we're coming in and we see the turnaround occurring every day. And we are workforce housing we're 100% dependent on the job market for blue collar workers but the job market is improving dramatically and we get to ride that wave.

And we're also putting in brand new homes that people have not seen in the recent past.

Let me cover the shell cracker plant. I believe it's between $2 billion and $4 billion and will require 10,000 people to build it over three years but it's -- they have not yet started construction but that's a pretty arbitrary line because pre-construction work was pretty substantial moving six lane highways and putting in utilities and that sort of thing but the shell is going ahead with this cracker plant and my understanding of the oil and gas industry is everyone expects two or three more plants of the same size in the same areas as they develop experience with it. So it’s going to be a very, very positive job and employment and economic growth of that area which is going to be fantastic there. I always tell you Pittsburgh is going to be like Qatar and the Middle East 10 years from now.

And Mike the thing we should tell everybody Google Panda Plants. Panda Plants take natural gas out of the ground and convert it to electricity, it's the most efficient form of electric generating ever created. They are opening these billion dollar plants all over Pennsylvania and it's going to be fantastic for Pennsylvania and fantastic for us.

And lastly if I could ask the Chairman Gene, I guess in Philadelphia last fall, you spoke I think got rather optimistically regarding the dividends, you continue to have that optimism looking ahead and may be also if you could give us some perspective looking in terms of the intrinsic value or speaking to the total return of UMH, what you see in the future as you witnessed UMH in tough times and now as things are starting to look better?

Well it's a cycle, what we're doing is building value into the parks and the parks are going ahead nicely and as we increase the occupancy and increase the rent, the ability to mortgage these parks increases. We think it takes several years to get to the point we can go back to Freddie Mac and I believe we borrow what is 70%, 75%.

70% to 75%.

70% to 75% of value and at that point when we can take a product that we bought and have turned around and go back and get the investment we made out of it, in fact get additional cash, there's a substantial amount of money that we can refinance and we're talking $20 million, $30 million, $40 million, an additional financing over the next two, three years based on the increased income from these parks. And as those numbers are realized and it just takes time to show Freddie Mac's that we're getting these results and going pipe for the mortgages and get them and then that cash really changes. Right now we put in $40 million in rental home, so we finance it largely out of our own equity and we will get all that equity back plus and I'm very optimistic that we will be able to increase the dividend substantially over the years as we increase occupancy with 19,300 sites with almost 3,000 vacancies and as we fill these vacancies, our financial strength will be substantial. So we will take a good look at the dividend as these numbers continue to improve.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Samuel Landy for any 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, Anna, and I are available for any follow-up questions. We hope to see you at NAREIT's REITWeek event in June and we look forward to reporting back to you after our second quarter. Thank you.